Montag was born in Silver Spring, Maryland to parents Darlene and Bill Montag, and became a sister when Heidi Montag was born on September 15, 1986. At the age of four, the family moved to Crested Butte, Colorado. After divorcing, Darlene married Tim Egelhoff and they had son Sky. The Egelhoffs owned The Timberline restaurant for twenty-one years until its closing in 2010. Her father Bill married Terri O'Hara; their step-brother Eric O'Hara died in 2008 after an accidental fall from an icy roof.
Montag grew up interested in singing, sports, theater, and dance. In May 2002, Montag was awarded a full scholarship at the University of Colorado. While at the college, she attended their film studies as well as the production program. When not involved with academics, Holly found herself to be passionate for both stand-up and sketch comedy. Soon after receiving her bachelor of arts degree in critical film studies, Montag moved to Los Angeles in order to pursue her ambitions in television, writing, acting, and directing.