Lipton was bown to a Jewish family. Both branches of her family were from either Russian or Latvian background.
Margaret Ann "Peggy" Lipton was born on August 30, 1946, in New York City to the family of artist Rita Benson (born Rita Hetty Rosenberg; 1912–1986) and corporate lawyer Harold Lipton (1911–1999). Lipton grew up as the middle child in an upper-middle-class Jewish family. She also has distant Russian and Latvian roots.
While she had many advantages growing up, Lipton also faced some difficult challenges. She developed a stutter around the age of 7. Lipton wrote in her memoir that the condition was likely connected to being sexually abused by a relative around this time.