Newman was born on March 2, 1952, in Los Angeles, California, the granddaughter of a cattle rancher from Arizona. Her family is Jewish. She is the youngest of four children and a twin (brother Paul). Her sister, Tracy Newman, is an Emmy Award-winning television writer. Newman attended Beverly Hills High School in Beverly Hills, California and graduated from there in 1970. Newman married actor-writer-director Chad Einbinder (born 1963) in 1991. They have two children, Spike (born 1991) and Hannah (born 1995).
The song Never Let Her Slip Away, written and recorded by Andrew Gold, was about Newman. The two were a couple at the time. The song hit #5 on the UK charts in 1978.