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[4] (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.