Furtado's parents emigrated from Portugal to Canada in the late 1970s. She has stated that visiting her parents' birthplace, the Azores islands, as a child and experiencing its culture and learning the Portuguese language has made her an open-minded person. This has strongly influenced her artistry as she has incorporated many cross-cultural sounds into her music. It is also evident in her multilingualism as she can speak English, Portuguese, Spanish and, to a lesser extent, Hindi. Furtado has acknowledged her parents as the source of her strong work ethic; she spent eight summers working as a chambermaid with her mother, who was a housekeeper in Victoria. She has stated that coming from a working class background has shaped her identity in a positive way.

Furtado first sang at the age of four when she performed a duet with her mother at church on Portugal Day. She began playing instruments at the age of nine, learning the trombone, ukulele and, in later years, the guitar and keyboard. She began writing songs at the age of twelve and, as a teenager, she played in a Portuguese marching band.

During these early years, Furtado embraced many musical genres, listening heavily to mainstream R&B, hip hop, alternative rock, alternative hip hop, trip hop, world music (including Portuguese fado, Brazilian bossa nova, and Indian music), and a variety of others. Her influences have included Jeff Buckley, Caetano Veloso, Amalia Rodrigues, Nusrat Fateh Ali Khan, Cornershop, Mariah Carey, TLC, Mary J. Blige, Digable Planets, De La Soul, Radiohead, Oasis, The Smashing Pumpkins, The Verve, U2, and Beck.

Furtado's music has also been influenced by her current residence, Toronto, which she calls "the most multicultural city in the entire world" and a place where she "can be any culture". Growing up in Canada and experiencing Toronto's cultural diversity, she has said that she did not have to wait for the Internet revolution to learn about world music; she began listening to it at the age of fifteen and continues to discover new genres. In 2006, she commented about her diverse taste:

The first musicians Furtado interacted with were underground rappers and DJs. During a visit to Toronto, after the summer of eleventh grade, she met Tallis Newkirk, member of hip hop group Plains of Fascination and contributed vocals to their 1996 album Join the Ranks on the track "Waitin' 4 the Streets". She spent the rest of that summer in Portugal, opening her mind to native rock acts, and then returned to British Columbia. After graduating from Mount Douglas Secondary School in 1996, she moved to Toronto where she eventually formed the trip hop duo Nelstar in 1997 with Newkirk. The experience led her back to her hip hop influences and allowed her to become more comfortable with writing her own melodies and rhymes. Although, "Like", one of the songs Nelstar recorded, received a VideoFACT grant to cover for the production of a music video, Furtado felt the trip-hop style of the duo was "too segregated" and believed it did not represent her personality or allow her to showcase her vocal ability. She left the group and decided to move back home.

Before moving, she performed at the 1997 Honey Jam, a female, mostly-black talent show at Toronto nightclub Lee's Palace. She performed to a Digital Audio Tape in jeans and a t-shirt. At the club, The Philosopher Kings singer Gerald Eaton (aka Jarvis Church) was impressed with her performance and approached her to write with him. Eaton and fellow Kings member Brian West, collectively known as Track and Field, helped Furtado produce a demo, but she already had plans to backpack through Europe and return home to take creative writing courses at Camosun College. She stayed in touch with Eaton and West who insisted that she return to Toronto to record more material. She eventually returned for two weeks; the material recorded during those sessions led to her record deal with DreamWorks Records in 1999.

Whoa, Nelly! (2000–2002)