Madhubala was born as Mumtaz Begum Jehan Dehlavi in New Delhi, India on 14 February 1933 in a Muslim family. She was the fifth child among eleven children of a conservative muslim couple.

After Madhubala's father Ataullah Khan lost his job at the Imperial Tobacco Company in Peshawer, the family endured many hardships, including the deaths of four of Madhubala's sisters and her two brothers. In search of a better life for his impoverished family, her father relocated his family to Mumbai. Young Mumtaz entered the movie industry at the age of nine.

Mumtaz’s first movie Basant (1942) was a box-office success. She played in it as the daughter of the popular actress Mumtaz Shanti. She went on to act in several movies as a child artist. Actress Devika Rani was impressed by her performances and potential and advised her to assume the name Madhubala. Madhubala soon garnered reputation as a reliable professional performer. By the time she entered adolescence, she was being groomed for lead roles.

Her first break came when producer Kidar Sharma cast her opposite Raj Kapoor in Neel Kamal (1947). She was fourteen when she was given a lead role. The film was not a commercial success, but her performance was received well.

During the next two years, she blossomed into a captivating beauty. After her lead role in Bombay Talkies production Mahal in 1949, Madhubala attained immense popularity. Though she was only 16 at the time, her subtle and skilful performance, upstaged her seasoned co-star Ashok Kumar. The movie and the song Aayega Aanewala in it heralded the arrival of two new superstars: Madhubala and playback singer Lata Mangeshkar.

Madhubala was found to have a heart problem after she coughed up blood in 1950. She was discovered to have been born with a ventricular septal defect, commonly known as a "hole in the heart". At the time, heart surgery was not widely available.

Madhubala hid her illness from the movie industry for many years, but one incident was widely reported by the media in 1954: She was filming in Madras for S.S. Vassan's Bahut Din Huwe when she vomited blood on the set. Vassan and his wife took care of her until she was well again. She continued to work and established herself as an A-grade star.

Madhubala's family was extremely protective of her because of her health problem. When filming at the studios, she would eat only home-prepared food and drink water only from a specific well in order to minimize risks of infection. But her condition took its toll and she died in 1969 at age 36. For most of the 1950s, Madhubala performed successfully despite her illnesss.

In the early 1950s as Madhubala became one of the most sought-after actresses in India, she also attracted interest from Hollywood. She appeared in many American magazines such as Theatre Arts. In their August 1952 issue, Madhubala was featured in an extensive article with a full page photo. The piece was entitled: The Biggest Star in the World (And She's Not in Beverly Hills). It presented the actress as a mysterious and ethereal woman of mythical beauty with a legion of fans.

During this period, on a trip to Mumbai and its film studios, the American filmmaker Frank Capra was pampered and hosted by the elite of the Hindi movie industry. However the one star he really wanted to meet was conspicuous by her absence, Madhubala. A meeting to discuss an opening for Madhubala in Hollywood was proposed by Capra. Madhubala's father declined and put an emphatic end to her potential Hollywood film career.