Katsav was born in Yazd, Iran. His family brought him to Tehran when he was an infant; in June 1951, when he was 5, they emigrated to Israel. He remains fluent in Persian. Upon arriving in Israel, the Katsav family was ultimately dispatched to an immigrant tent-camp in Israel's south, inland from the port city of Ashdod. In the winter of 1951, severe flooding inundated the camp, and Katsav's two-month-old brother, Zion, was killed. Young Katsav and his family lived in a tent in the transit camp for two years. They then spent an additional four years in a temporary hut. By then, the transit camp in which the Katsavs had been living had been transformed into the "development town" of Kiryat Mal'akhi.
Katsav attended the Hebrew University of Jerusalem beginning in 1968, and while studying he taught history and mathematics in a high school. He graduated in 1971 with a Bachelor of Arts in economics and history.