Gascoigne was born in Dunston, Tyne and Wear on 27 May 1967. His father, John (1946-2018), was a hod carrier, and his mother, Carol, worked in a factory. He was named Paul John Gascoigne in tribute to Paul McCartney and John Lennon of the Beatles. He attended Breckenbeds Junior High School, then the Heathfield Senior High School, both in the Low Fell area of Gateshead.

In his first season at White Hart Lane Gascoigne helped Terry Venables's Spurs to sixth in the First Division, scoring seven goals in 37 appearances. They rose to third place in 1989-90, but were still 16 points behind champions Liverpool. He was named as BBC Sports Personality of the Year in 1990, and on accepting the award said that "I haven't won anything in the game as yet. But the World Cup did help to put England on the map". He was also named as Tottenham Hotspur's Player of the Year.  Gascoigne was named on the PFA Team of the Year in the 1990-91 season as Tottenham reached the FA Cup Final, with victories over Blackpool, Oxford United, Portsmouth, Notts County and North London derby rivals Arsenal. He scored the opening goal of the 3-1 victory over Arsenal at Wembley with a free-kick, one of six goals he scored in the competition. Going into the final against Nottingham Forest he had already agreed terms to join Italian club Lazio in an PS8.5 million deal. However just 15 minutes into the game he committed a dangerous knee-high foul on Gary Charles and ruptured his own cruciate ligaments in his right knee. England teammate Stuart Pearce scored from the resultant free kick, and Gascoigne subsequently collapsed after the kick-off, forcing him to leave the match on a stretcher. Tottenham went on to win the Cup in extra-time.  He missed the entire 1991-92 season while he recovered, suffering a further knee injury in late 1991, when an incident at a nightclub on Tyneside kept him out for even longer. The saga over Gascoigne's proposed transfer to Lazio dominated the tabloid press throughout 1991, often overshadowing the key national news of that time - namely the recession and rise in unemployment that it sparked - although the broadsheet newspapers generally kept stories about Gascoigne confined to their back pages.  "I'm very pleased for Paul but it's like watching your mother-in-law drive off a cliff in your new car."

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He missed the entire 1991-92 season while he recovered, suffering a further knee injury in late 1991,