Kate Capshaw was born Kathleen Sue Nail in Fort Worth, Texas, to Beverley Sue (Simon), a beautician and travel agent, and Edwin Leon Nail, an airline employee. Capshaw worked as a teacher with an MA in Learning Disabilities. Her desire to be an actress led her to New York where she landed a role on the soap The Edge of Night (1956). She met her future husband, Steven Spielberg while beating out 120 actresses for the female lead in Indiana Jones and the Temple of Doom (1984).
She married marketing manager Robert Capshaw in January 1976 and they had one child, actress Jessica Capshaw, before eventually divorcing in 1980. However, she kept the surname Capshaw and adopted it as her professional name upon becoming an actress.