Mani Ratnam was born on 2 June 1956, as the second child of a family that was closely associated with film production. His father S. Gopala Ratnam was a film distributor who worked for Venus Pictures, and his uncle "Venus" Krishnamurthy was a film producer. His elder brother G. Venkateswaran would go on to produce some of his films. His younger brother is G. Srinivasan, who like Venkateswaran would co-produce some of his films. Mani Ratnam grew up in Madras (now Chennai), along with his siblings and cousins. Despite being a film family, the children were not allowed to watch films as the elders considered it a "taboo". "As a youngster, films seemed like a waste of time", he claimed in a 1994 interview; however, he started watching films more actively when he was studying in the Besant Theosophical School. During this time, he developed an admiration towards actors like Sivaji Ganesan and Nagesh; watching all their films. When he was 15 he discovered director K. Balachander and became a fan. Upon completing his schooling, he graduated with a degree in commerce from the Ramakrishna Mission Vivekananda College, affiliated to the Madras University. Later, he did his Master of Business Administration (MBA) in finance from Jamnalal Bajaj Institute of Management Studies, Mumbai. After finishing his post-graduation in 1977, he was employed in a firm in Madras as a management consultant, and continued to work there for sometime.

Mani is married to Suhasini, an established actress in South Indian cinema then. The two first met in 1988 and got married the same year. The couple have a son Nandhan (born 1992). The family resides in Alwarpet, Chennai, where he runs his production company, Madras Talkies.

Beginnings: 1977–1983

Mani Ratnam was not satisfied with his job as a consultant as he found it to be a mere extension of his academics. During this time his friend Ravi Shankar, son of director B. R. Panthulu, was in the process of making his first film, in Kannada. Mani Ratnam had accompanied Ravi Shankar along with another friend called Raman, son of filmmaker S. Balachander, to complete the script of the film. Mani Ratnam took a sabbatical from his job in order to ensure his participation in the making of the film. Being inexperienced, the makers were largely dependent upon the American Cinematographer magazine. The principal cast included Vishnuvardhan, Srinath, Ambarish, Lakshmi, and Roja Ramani. When the filming was about to begin in Kolar, Karnataka, Mani Ratnam left his consulting job and joined the crew. The film, however, did not take off and was eventually shelved. Nevertheless, he was firm in his idea of becoming a film-maker. Although not pleased with the films made in Tamil cinema till then, he was "amazed" at P. Bharathiraja's 16 Vayathinile (1977), K.Balachander's Apoorva Raagangal (1975), and J. Mahendran's Mullum Malarum (1978) and Uthiripookkal (1979). During this time, he befriended a group of people namely P. C. Sreeram, Santhana Bharathi, and P. Vasu, who shared common interests of entering into the film industry.

With a script in hand, Mani Ratnam had an idea to either get a producer for his film or to narrate the script to a "celebrated" film-maker, so that he could get a chance to work along with them and get to know about the various aspects involved in film-making. He chose three directors—Balachander, Bharathiraja, and Mahendran. As the attempts to meet and convince all the three proved to be unsuccessful, he decided to look out for a producer. In the process, he along with P. C. Sreeram—who would collaborate with him in most of his future projects—met around 20 people; however, all the efforts turned out to be unsuccessful.

Early years and struggle: 1983–1986

Mani Ratnam developed a script—originally written in English—into a film and named it Pallavi Anu Pallavi. His uncle Krishnamurthy agreed to produce the film but imposed a condition that it should be made under a limited budget in Kannada, to which he agreed. As a debutant, Mani Ratnam wanted to make sure that the technical aspects of the film are good. He persuaded Balu Mahendra to do the cinematography as he found the latter's work to be very impressive. He managed to get other crew members B. Lenin (for editing), Thotta Tharani (for art direction) and Ilaiyaraaja (for music composer music), all leading craftsmen in their respective fields then. For the male lead, he cast Anil Kapoor after watching his performance in the Telugu film Vamsa Vruksham (1980). Lakshmi who was a leading actress then, was signed up as the female lead. The film explored the relationship between a young man and an older woman. Although an average grosser at the box-office, the film fetched Mani Ratnam the Best Screenplay Award from the Karnataka State Government for the year 1983. After watching Pallavi Anu Pallavi, N. G. John, a Malayalam film producer, offered him a chance to direct a film in Malayalam. Scripted by T. Damodaran, Unaru was about the corruption in labour unions of Kerala. The film was completed with in two months and got released in April 1984. Mani Ratnam attributed the failure of the film to the conflict of interests that he and the producer had. Following this, he entered Tamil cinema when G. Thyagarajan of Sathya Jyothi Films offered him a chance to direct Pagal Nilavu (1985). The film had Murali and Revathi playing lead roles. It was different from his previous two films in a way that it included dance sequences and a "comedy track". However, the film turned out to be another failure for him. The same year, he directed another Tamil film Idaya Kovil, a romantic drama. He remodeled a ready made script on the lines of Charlie Chaplin's Limelight (1952). Described by himself as an unsatisfied work, the film was a major box-office success. The phase between 1983 and 1986 was the toughest of his career with only Pallavi Anupallavi being a satisfiable film; the rest three were done with a lot of "compromises".

Breakthrough: 1986–1991

In 1986, Mani directed the Tamil romantic drama Mouna Ragam, which starred Revathi and Mohan. The film was critically acclaimed for portraying urban Tamils in a "realistic" manner. Specifically, it told the story of the friction between a newly-wed couple. The score by Ilaiyaraaja was appreciated and became popular upon release. Mouna Raagam was subsequently dubbed into Telugu under the same title and became a hit in Andhra Pradesh as well. The film elevated Mani's status as a director, and won the National Film Award for Best Feature Film in Tamil at the 34th National Film Awards. He won his first Filmfare Award for directing the film.

In 1987, Mani directed Nayakan starring Kamal Haasan, and the film became a huge success and brought him recognition at the national level. Inspired by the 1972 American crime film, The Godfather, the film was based on the real-life story of underworld don Varadarajan Mudaliar, and tells the story of an orphaned slum-dweller and his rise to top of the Mumbai underworld hierarchy, was included in Time magazine's All-Time 100 Greatest Movies in 2005. Satyajit Ray's The Apu Trilogy and Guru Dutt's Pyaasa are the only other Indian films that have appeared in the list. Indian critics dubbed the film as India's answer to The Godfather. Nayakan was both commercially successful and critically acclaimed winning three National Awards—Best Actor, Best Cinematography and Best Art Direction—at the 35th National Film Awards. The film was India's official entry to the Oscars for Best Foreign Language Film at the 60th Academy Awards, but was not nominated.

Following these two commercial successes, Mani wrote and directed Agni Natchathiram in 1988. The film deals with the story of step-brothers played by Prabhu and Karthik and is notable for its use of new techniques in camera framework, especially during the songs. The film had a successful run in the box office.

In 1989, Telugu actor Nagarjuna requested Mani Ratnam to direct a Telugu film with him in the lead role, which Ratnam agreed to after initial reluctance. It remains the only Telugu film directed by Ratnam. The film Geethanjali which had Nagarjuna and Girija Shettar in the lead, told the story of an ill-fated couple, both of whom are suffering from terminal diseases. Geethanjali was critically acclaimed and won the National Film Award for Best Popular Film Providing Wholesome Entertainment in 1990. In addition, it won the Best Director and Nandi Award for Best Story Writer for Mani. Mani maintained a momentum of making emotional stories of under-served people through the film Anjali in 1990, which starred Baby Shamili as the central character. The film which also had Raghuvaran and Revathy, told the story of an autistic child who changed the lives of people around her. The film proved to be a commercial success and was nominated as India's official entry to the Oscars in the Best Foreign Language Film category at the 63rd Academy Awards. Following Anjali's release, Mani later made another underworld-themed Tamil film, Thalapathi (1991), starring Rajinikanth and Mammoot