Agnihotri was born into a Punjabi Brahmin Hindu family, the son of Rohit Agnihotri, an actor of yesteryear who quit films after a brief stint and later tried his hand at business. Agnihotri lost his father at a young age and the responsibility of supporting his family came upon him. Agnihotri's first cousin is actress Rati Agnihotri, who lived with them in Mumbai for two years and made her entry into films during that time; essentially, this inspired Atul to join films likewise.