He is most famous for making lyrical and artistic films within the context of popular Hindi cinema of the 1950s, and expanding its commercial conventions, starting with his 1957 film, Pyaasa. Several of his later works have a cult following. His movies go full house when re-released; especially in Germany, France and Japan. The latest book on him is Ten Years with Guru Dutt: Abrar Alvi's Journey by Sathya Saran based on the recollections of his chief scriptwriter and friend.

Guru Dutt was born to Shivashanker Rao Padukone and Vasanthi Padukone. His parents were Chitrapur Saraswats, originally settled at Panambur, a village in South Kanara district of present day state Karnataka (then Madras Province). His father was initially a headmaster, and then a bank employee. His mother Vasanthi, while initially a housewife, later taught in a school, gave private tuition and also wrote short stories and translated Bengali novels into Kannada. Vasanthi was only 16 when Guru Dutt was born.

Guru Dutt had a tough childhood with financial difficulties, and a strained relationship between his parents. As a child he had some bad experiences; the hostility from his maternal uncle's family, a frightening encounter with his insane maternal adopted uncle, and the death of his seven-month old brother (Shashidhar).[citation needed]

Guru Dutt was initially named Vasanth Kumar at birth at the suggestion of his mother's elder brother, but after a childhood accident, he was renamed Guru Dutt, which was felt to be a more auspicious name. He was joined by three younger brothers, Atmaram, Devidas and Vijay and a younger sister, Lalitha. The Indian film director, Kalpana Lajmi, is his sister's daughter.

He spent a great deal of time with his mother's cousin, Balakrishna B. Benegal (known to the family as Bakutmama) who was a painter of cinema posters. The Indian film director, Shyam Benegal, is the son of Sridhar B. Benegal, Balakrishna's younger brother.

Guru Dutt's father was initially a headmaster at Panambur and later a bank employee at Bangalore. He moved jobs to work as an administrative clerk at the Burmah Shell company and began living at Bhawanipore in Calcutta, where Guru Dutt finished his schooling. Hence, Guru Dutt spoke fluent Bengali, and carried a distinct stamp of Bengali culture in his work[citation needed]. Later, when he moved to Bombay (now called Mumbai) in the 1940s, he dropped the Shivashankar Padukone part of his name, and was known simply as Guru Dutt. Because Dutt is a common Bengali last name, many people assumed that he was a Bengali.

His sister recalls that at age 14 Guru Dutt would use his fingers to shape images on a wall lit up by the flickering light of their grandmother’s diya as she performed the evening arathi. Though untrained, he could produce inspired movements as he did when he persuaded his uncle, Benegal, to photograph him performing a snake dance, based on a painting by the latter. The snake dance was later performed at a gathering of Saraswat Brahmins at Calcutta for which Guru Dutt was even given a cash prize of 5 Rupees.

He was a good student, but never went to college, partly because of financial troubles at home. Instead, he joined the performing arts troupe of Uday Shankar, the older brother of the better-known Ravi Shankar.

The Uday Shankar India Culture Center at Almora taught dance, drama, and music. It aimed at combining the best of the Gurukula system with a modern Arts University, and tried to turn out well-rounded students, at home in many disciplines. A young Guru Dutt joined the center at age 16 in 1941 on a five-year scholarship of Rs. 75 annually (a lot of money then), and studied at Almora until 1944, when the advancing World War II forced the closing of the center.

Guru Dutt wired home to say he had got the job of a telephone operator at a Lever Brothers factory in Kolkata. But soon he disengaged himself from the job, and joined his parents in Mumbai in 1944.