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Merchant was born in Hanham, Avon, the son of nursery nurse Jane Elaine (nee Hibbs) and insurance representative Ronald John Merchant. He attended Hanham High School and later the University of Warwick in Coventry from 1993 to 1996, where he received a 2:1 Bachelor of Arts degree in Film and Literature. Merchant was a former film reviewer on the student radio station Radio Warwick, where he began his broadcasting career. Members of Merchant's "posse" included film critic James King, Dan Warren, Neil the Maskell, and Geraint the Welshman.

Merchant began his career performing stand-up comedy at Bristol's Comedy Box, where, he recalls, "The first week I did really well. The second week I died on my arse. I realised that stand-up was not that easy after all." He also appeared as a contestant on a 1997 episode of the TV game show Blockbusters and worked for a short time as a DJ for Radio Caroline.  Merchant met Ricky Gervais for the first time in 1997, when Gervais (then in the position of "Head of Speech" at the London radio station XFM London) hired Merchant as his assistant. (Gervais said later that he had called Merchant for an interview simply because it was the first CV handed to him.) Merchant and Gervais hosted a Saturday afternoon radio show together from January through to August 1998, when both of them left XFM as it was bought by the Capital Radio Group. In the same year, Merchant was a finalist at the Daily Telegraph Open Mic Awards.  Merchant worked for seven years at XFM 104.9. The Saturday show never had a large audience; Gervais says "It's a tin pot radio station... It's not even the biggest radio station in the building." He created the features 'Hip Hop Hooray', 'Make Ricky Gervais Laugh' and 'Song for the Ladies'. After leaving XFM, Merchant began a production course at the BBC. As part of his coursework, he enlisted Gervais to perform in a 30-minute short film, "Seedy Boss," which became the earliest inspiration for their sitcom The Office. They collaborated on a sitcom pilot called Golden Years featuring a manager suffering a mid-life crisis; the pilot aired on Channel 4's Comedy Lab series in September 1998, but failed to find further success.
Stephen Merchant