Tabu was born in Hyderabad to Jamal Hashmi and Rizwana. Soon after, her parents divorced. Her mother was a school teacher and her maternal grandparents were retired professors who ran a school. Her grandfather, Mohammed Ahsan was a professor of Mathematics and her grandmother was a professor of English Literature. She went to St. Anns high school in Hyderabad. Tabu moved to Mumbai in 1983 and studied at St. Xavier's College for two years.She is the niece of Shabana Azmi and the younger sister of actress Farah Naaz. She has homes in Mumbai and Hyderabad.

Tabassum Hashmi began her career in the film Hum Naujawan (1985) at the age of fifteen; she played Dev Anand's daughter in the film. Her first role as an actress was in the Telugu film Coolie No. 1. In December 1987, Boney Kapoor launch two Big Films, Roop Ki Rani Choro Raja and Prem. In Prem, Tabu was signed opposite Sanjay Kapoor. The film took eight years in making. Tabu once jokily said "I should get a the most waiting newcomer of decade". Her first release in Hindi as a leading lady was Pehla Pehla Pyar which went un-noticed. She came into prominence with her role in Vijaypath (1994) opposite Ajay Devgan for which she received the Filmfare Best Female Debut Award. This was followed by many films that did not do well at the box office.