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Cameron was born in 1954 in Kapuskasing, Ontario, Canada, the son of Shirley (nee Lowe), an artist and nurse, and Phillip Cameron, an electrical engineer. His paternal great-great-great-grandfather emigrated from Balquhidder, Scotland, in 1825. Cameron grew up in Chippawa, Ontario, and attended Stamford Collegiate School in Niagara Falls, Ontario. His family moved to Brea, California in 1971, when Cameron was 17 years old.

After completing a screenplay for The Terminator, Cameron decided to sell it so that he could direct the movie. However, the production companies he contacted, while expressing interest in the project, were unwilling to let a largely inexperienced feature film director make the movie. Finally, Cameron found a company called Hemdale Pictures, which was willing to let him direct. Gale Anne Hurd, who had started her own production company, Pacific Western Productions, had previously worked with Cameron in Roger Corman's company and agreed to buy Cameron's screenplay for one dollar, on the condition that Cameron direct the film. Hurd was signed on as a producer, and Cameron finally got his first break as director. Orion Pictures distributed the film. Hurd and Cameron were married from 1985 to 1989.  For the role of the Terminator, Cameron envisioned a man who was not exceptionally muscular, who could "blend into" a crowd. Lance Henriksen, who had starred in Piranha II: The Spawning, was considered for the title role, but when Arnold Schwarzenegger and Cameron first met over lunch to discuss Schwarzenegger's playing the role of Kyle Reese, both came to the conclusion that the cyborg villain would be the more compelling role for the Austrian bodybuilder; Henriksen got the smaller part of LAPD detective Hal Vukovich and the role of Kyle Reese went to Michael Biehn. In addition, Linda Hamilton first appeared in this film in her iconic role of Sarah Connor, and later married Cameron.  The Terminator was a box-office hit, breaking expectations by Orion Pictures executives that the film would be regarded as no more than a sci-fi film, and then only last a week in theaters. It was a low-budget film which cost $6.5 million to make, cutting expenses in such ways as recording the audio track in mono. However, The Terminator eventually earned over $78 million worldwide.
James Cameron