Underwood was born March 10, 1983, in Muskogee, Oklahoma, to Carole (Shatswell) and Steve Underwood, She has two older sisters, Shanna and Stephanie, and was raised on her parents' farm in the nearby rural town of Checotah. Her father worked in a paper mill while her mother taught elementary school. During her childhood, Underwood performed at Robbins Memorial Talent Show, and sang at her local church, First Free Will Baptist Church. She later sang for local events in Checotah, including Old Settler's Day and the Lion's Club.
A local admirer arranged for her to go to Nashville when she was 14 to audition for Capitol Records. In 1996, Capitol Records was preparing a contract for Underwood but canceled it when company management changed. Underwood said of the event, "I honestly think it's a lot better that nothing came out of it now, because I wouldn't have been ready then. Everything has a way of working out."
While at Checotah High School, she was an Honor Society member, a cheerleader, and played basketball and softball. Underwood graduated from Checotah High School in 2001 as salutatorian. She chose not to pursue singing after graduation. She said, "After high school, I pretty much gave up on the dream of singing. I had reached a point in my life where I had to be practical and prepare for my future in the 'real world'".
She attended Northeastern State University in Tahlequah, Oklahoma, graduating magna cum laude in 2006 with a bachelor's degree in mass communication and an emphasis in journalism. She spent part of one of her summers as a page for Oklahoma State Representative Bobby Frame. She also waited tables at a pizzeria, worked at a zoo, and at a veterinary clinic. Underwood is an alumna of the Alpha Iota chapter of Sigma Sigma Sigma sorority.
For two summers, she performed in Northeastern State University's Downtown Country show in Tahlequah. She competed in numerous beauty pageants at the university and was selected as Miss NSU runner-up in 2004.