Shyamalan dilahirkan Mahé, Puducherry, India.[1][3] Ayahnya, Nelliyattu C. Shyamalan, seorang Indian Malayali physician belonging to a famous "Thiyya" tharavad dari Mahe, Kerala. Ibunya, Jayalakshmi, seorang Tamil Indian and an obstetrician and gynecologist by profession.[4] In the 1960s, after medical school (di Jawaharlal Institute of Postgraduate Medical Education & Research di Puducherry) dan kelahiran anak pertama mereka, Veena, ibu bapanya berpindah ke Amerika Syarikat. His mother returned to India to spend the last five months of her pregnancy with him at her parents’ home in Chennai (Madras).

Shyamalan spent his first six weeks in Puducherry, dan dibesarkan di Penn Valley, Pennsylvania, an affluent suburb of Philadelphia. He attended the private Roman Catholic grammar school Waldron Mercy Academy, though he was a Hindu (they chose it for disciplinary reasons), followed by the Episcopal Academy, a private Episcopal high school located at the time in Merion, Pennsylvania. Shyamalan went on to New York University’s Tisch School of the Arts, in Manhattan, graduating in 1992.[petikan diperlukan] It was while studying there that he adopted Night as his second name.[5]

Shyamalan had an early desire to be a filmmaker when he was given a Super-8 camera at a young age. Though his father wanted him to follow in the family practice of medicine, his mother encouraged him to follow his passion.[6] By the time he was 17 the Steven Spielberg fan had made 45 home movies. Beginning with The Sixth Sense, he has included a scene from one of these childhood films on each DVD release of his films, which he feels represents his first attempt at the same kind of film (with the exception of Lady in the Water).