Fox was born in Edmonton, Alberta, Canada, on June 9, 1961, the son of Phyllis (née Piper) and William Nelson Fox. William was a 25-year veteran of the Canadian Forces who later became a police dispatcher, while Phyllis was a payroll clerk and actress. Fox is of English and Irish descent, with his maternal grandparents being from England and Belfast, Northern Ireland.
Fox's family lived in various cities and towns across Canada due to his father's career. They moved to Burnaby, a city outside of Vancouver, when his father retired in 1971. His father died of a heart attack on January 6, 1990. His mother died in September 2022. Fox attended Burnaby Central Secondary School, and has a theatre named for him at Burnaby South Secondary. At age 16, Fox starred in the Canadian television series Leo and Me, produced by the Canadian Broadcasting Corporation, and in 1979, at age 18, he moved to Los Angeles to further his acting career. Shortly after his 1988 marriage, he moved back to Vancouver.
Fox was discovered by producer Ronald Shedlo and made his American debut in the television film Letters from Frank, credited under the name "Michael Fox". However, when he registered with the Screen Actors Guild, he discovered that Michael Fox, a veteran character actor, was already registered under that name. Fox explained in his autobiography Lucky Man: A Memoir: