McManaman was born in Bootle, Merseyside. He grew up as an Everton supporter, with his boyhood heroes in football being the Everton players Bob Latchford and Duncan McKenzie. But when Everton offered the player a one-year contract (after McManaman had made a name for himself at tournaments for school and around Merseyside), McManaman's father rejected it in favour of a schoolboy contract and two-year apprenticeship offer from Liverpool (through scout Jim Aspinall and then manager Kenny Dalglish). McManaman signed as a 16-year-old apprentice upon leaving school in 1988. As an apprentice, McManaman was under the mentoring of John Barnes – one of the players McManaman was groomed to potentially replace in the long run. A natural athlete and cross country champion at school level, McManaman developed through the youth scheme at Liverpool and signed as a full professional on 19 February 1990 in what was to be Kenny Dalglish's final full season as manager. He made his Liverpool debut under Dalglish as a substitute for Peter Beardsley in the Football League First Division on 15 December 1990, in a 2–0 league win over Sheffield United at Anfield, and made his full debut the following season (by which time Graeme Souness had become the new manager) in a 2–1 win over Oldham Athletic; a game in which "The Guardian" newspaper reported that he "ran his legs into the ground" all day and assisted his mentor Barnes in scoring the late winner by flicking on Mark Walters' cross. He scored his first ever professional goal with a diving header four days later on 21 August 1991 in the 2–1 defeat to Manchester City at Maine Road.