Dietrich was born on at Leberstraße 65 in the neighborhood of Rote Insel in Schöneberg, now a district of Berlin. Her mother, Wilhelmina Elisabeth Josefine ("née" Felsing), was from an affluent Berlin family who owned a jewelry and clock-making firm. Her father, Louis Erich Otto Dietrich, was a police lieutenant. Dietrich had one sibling, Elisabeth, who was one year older. Dietrich's father died in 1907. His best friend, Eduard von Losch, an aristocratic first lieutenant in the Grenadiers, courted Wilhelmina and married her in 1914, but he died in July 1916 from injuries sustained during the First World War. Von Losch never officially adopted the Dietrich sisters, so Dietrich's surname was never von Losch, as has sometimes been claimed.