Dennings was born and raised in the Bryn Mawr area, near Philadelphia, Pennsylvania. Her mother, Ellen Judith Litwack, is a poet and speech therapist, and her father, Gerald J. Litwack, is a molecular pharmacologist, and college professor and chairman. Dennings is the youngest of five children, including an older brother, Geoffrey S. Litwack. Her family is Jewish.
Dennings was homeschooled; her only enrollment at a traditional school was for a half-day at Friends' Central School. She graduated from high school early, at the age of 14. She moved with her family to Los Angeles, California, so that she could act full-time. She adopted the name Dennings as her professional name when she was younger. According to Dennings, as stated in Interview magazine in 2007, her parents initially considered her idea of pursuing an acting career to be "the worst idea ever."