Sherman was born on February 8, 1820 in Lancaster, Ohio, near the banks of the Hocking River. His father, Charles Robert Sherman, a successful lawyer who sat on the Ohio Supreme Court, died unexpectedly in 1829. He left his widow, Mary Hoyt Sherman, with eleven children and no inheritance. After his father's death, the nine-year-old Sherman was raised by a Lancaster neighbor and family friend, attorney Thomas Ewing, Sr., a prominent member of the Whig Party who served as senator from Ohio and as the first Secretary of the Interior. Sherman was distantly related to American founding father Roger Sherman and grew to admire him.
There has been much speculation on Sherman's middle name. In his memoirs, he wrote that his father gave him the name William Tecumseh because he admired the Shawnee chief Tecumseh who had tried to unite Ohio River Valley Native American tribes in the early 19th century.