Michael Murphy was born in Los Angeles, California, to Georgia Arlyn (née Money), a teacher, and Bearl Branton Murphy, a salesman. After a hitch in the Marine Corps, Murphy attended the University of Arizona, Tuscon, and then went to U.C.L.A. to get his teaching credential. From 1962 to 1964, he taught high school English and drama in Los Angeles.
In 1988, Michael Murphy married the co-star of his short-lived television show Hard Copy, the actress Wendy Crewson. They have two children, a daughter, Maggie Murphy, born in 1989, and a son, John ("Jack") Branton Murphy, born in 1992.