Chamberlain was born on 18 March 1869 in a house called Southbourne in the Edgbaston district of Birmingham. He was the only son of the second marriage of Joseph Chamberlain, who later became Mayor of Birmingham and a Cabinet minister. His mother was Florence Kenrick, a cousin of William Kenrick MP; she died when he was a small boy. Joseph Chamberlain had had another son, Austen Chamberlain, by his first marriage. The Chamberlain family were Unitarian, though Joseph lost personal religious faith by the time Neville was six years old and never required religious adherence of his children. Neville, who disliked attending worship services of any kind and showed no interest in organised religion, described himself as a Unitarian with no stated faith and also a "reverent agnostic."

Neville Chamberlain was educated at home by his elder sister Beatrice Chamberlain and later at Rugby School. Joseph Chamberlain then sent Neville to Mason College, now the University of Birmingham. Neville Chamberlain had little interest in his studies there, and in 1889 his father apprenticed him to a firm of accountants. Within six months he became a salaried employee. In an effort to recoup diminished family fortunes, Joseph Chamberlain sent his younger son to establish a sisal plantation on Andros Island in the Bahamas. Neville Chamberlain spent six years there but the plantation was a failure, and Joseph Chamberlain lost £50,000 (equivalent to £6,144,000 in 2024).

Chamberlain threw himself into parliamentary work, begrudging the times when he was unable to attend debates and spending much time on committee work. He was chairman of the national Unhealthy Areas Committee (1919–21) and in that role, had visited the slums of London, Birmingham, Leeds, Liverpool and Cardiff. Consequently, in March 1920, Bonar Law offered him a junior post at the Ministry of Health on behalf of the Prime Minister, but Chamberlain was unwilling to serve under Lloyd George and was offered no further posts during Lloyd George's premiership. When Law resigned as party leader, Austen Chamberlain took his place as head of the Unionists in Parliament. Unionist leaders were willing to fight the 1922 election in coalition with the Lloyd George National Liberals, but on 19 October, Unionist MPs held a meeting at which they voted to fight the election as a single party. Lloyd George resigned, as did Austen Chamberlain, and Law was recalled from retirement to lead the Unionists as prime minister.

Many high-ranking Unionists refused to serve under Law to the benefit of Chamberlain, who rose over the course of ten months from backbencher to Chancellor of the Exchequer. Law initially appointed Chamberlain Postmaster General and Chamberlain was sworn of the Privy Council. When Sir Arthur Griffith-Boscawen, the Minister of Health, lost his seat in the 1922 election and was defeated in a by-election in March 1923 by future home secretary James Chuter Ede, Law offered the position to Chamberlain. Two months later, Law was diagnosed with advanced, terminal throat cancer. He immediately resigned and was replaced by Chancellor of the Exchequer Stanley Baldwin. In August 1923, Baldwin promoted Chamberlain to the position of Chancellor of the Exchequer.

Baldwin called a general election for 30 May 1929, resulting in a hung parliament with Labour holding the most seats. Baldwin and his government resigned and Labour, under MacDonald, again took office. In 1931, the MacDonald government faced a serious crisis as the May Report revealed that the budget was unbalanced, with an expected shortfall of £120 million. The Labour government resigned on 24 August, and MacDonald formed a National Government supported by most Conservative MPs. Chamberlain once again returned to the Ministry of Health.

After the 1931 general election, in which supporters of the National Government (mostly Conservatives) won an overwhelming victory, MacDonald designated Chamberlain as Chancellor of the Exchequer. Chamberlain proposed a 10% tariff on foreign goods and lower or no tariffs on goods from the colonies and the Dominions. Joseph Chamberlain had advocated a similar policy, "Imperial Preference"; Neville Chamberlain laid his bill before the House of Commons on 4 February 1932 and concluded his address by noting the appropriateness of his seeking to enact his father's proposal. At the end of the speech, Sir Austen Chamberlain walked down from the backbenches and shook his brother's hand. The Import Duties Act 1932 passed Parliament easily.