The Kapoor family hailed from Samundri near the town of Lyallpur in present-day Pakistan. Raj Kapoor was born on 14th December 1924, at Peshawar in the North-West Frontier Province of what is now Pakistan. He was named Ranbirraj Kapoor at birth, and was the eldest of the four children of renowned stage and cinema actor Prithviraj Kapoor and his wife Smt. Ramsarni (Rama) Devi nee Mehra. His younger brothers were the actors Shammi Kapoor and Shashi Kapoor. He also had a sister by name Urmila Sial. In 1946, at the age of twenty-two, Raj Kapoor was wed to Krishna Malhotra belonging to Jabalpur in a traditional family-arranged wedding. Krishna was Raj Kapoor's first cousin once removed, being his father's maternal uncle's daughter.Her brothers Premnath as well as Rajindernath were also actors. Raj Kapoor and Krishna's eldest son Randhir Kapoor was born the following year, followed by their elder daughter Ritu the year after, in 1948. The second son Rishi Kapoor was born in 1952, and second daughter Rima in 1956. Their youngest son, Rajiv Kapoor was born in 1962. Randhir Kapoor, Rishi Kapoor and Rajiv Kapoor have all been associated with the Hindi film industry as actors, directors or producers.

Raj Kapoor is also known to have had a longtime romantic relationship with the renowned actress Nargis Dutt during the 1950s. The couple starred in several films together, including Awaara and Shri 420.

Noted film personalities Karisma Kapoor and Kareena Kapoor are the granddaughters of Raj and Krishna Kapoor, being the daughters of their eldest son Randhir Kapoor by his wife Babita.