Lyonne was born in New York City, New York to Aaron Braunstein, a former boxing promoter and racecar driver, and Yvette Lyonne, a product licensing consultant and former ballerina. Lyonne grew up in a conservativeJewish household and lived in Israel with her family during her childhood; her maternal grandparents are Holocaust survivors. When her parents divorced, Lyonne moved back to New York and lived with her mom and older brother Adam in a one-bedroom apartment.
Angry and confused over the divorce of her parents, Lyonne hated her high school years and spent time in several different schools. She first attended private Jewish school at Ramaz in Manhattan. Natasha's frustration during these years caused her to get into fistfights and skip school in order to be alone and away from peers. Her mother moved then to Miami, where she switched to a public high school. At sixteen, she left her mother in Miami and moved back to New York on her own. She later dropped out of school to start making movies.