Ballmer was born in Detroit; he was the son of Beatrice Dworkin and Frederic Henry Ballmer (Fritz Hans Ballmer), a manager at the Ford Motor Company. His father was a Swiss immigrant, and his mother was Belarusian Jewish. Through his mother, Ballmer is a second cousin of actress and comedian Gilda Radner. Ballmer grew up in the affluent community of Farmington Hills, Michigan.

On March 6, 2008, Seattle mayor Greg Nickels announced that a local ownership group involving Ballmer made a "game changing" commitment to invest $150 million in cash toward a proposed $300 million renovation of KeyArena and were ready to purchase the Seattle SuperSonics from the Professional Basketball Club LLC in order to keep the team in Seattle. However, this initiative failed, and the SuperSonics relocated to Oklahoma City, Oklahoma, where they now play as the Oklahoma City Thunder.  In June 2012, Ballmer was an investor in Chris R. Hansen's proposal to build a new arena in the SoDo neighborhood of Seattle and bring the SuperSonics back to Seattle. On January 9, 2013, Ballmer and Hansen led a group of investors in an attempt to purchase the Sacramento Kings from the Maloof family and relocate them to Seattle for an estimated $650 million. However, this attempt also fell through.  Following the Donald Sterling scandal in May 2014, Ballmer was the highest bidder in an attempt to purchase the Los Angeles Clippers for a reported price of $2 billion, which is the second highest bid for a sports franchise in North American sports history (after the $2.15 billion sale of the Los Angeles Dodgers in 2012). After a California court confirmed the authority of Shelly Sterling to sell the team, it was officially announced on August 12, 2014 that Ballmer would become the Los Angeles Clippers owner.  On September 25, 2014, Ballmer said he would bar the team from using Apple products such as iPads, and replace them with Microsoft products. It has been reported that he had previously also barred his household family from using iPhones.

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