Barrett was born Katherine Harwood Waller at her family's historic estate, Clifton, in Falmouth, Virginia, to Ann Eliza Stribbling Waller and Withers Waller on January 24, 1857. Her family owned slaves on several large plantations, and Barrett's two young black playmates named Jane and Lucy were "given" to young Kate as a birthday gift on her sixth birthday by her grandmother. Later regretting these circumstances, Barrett stated "I looked upon them as mine by 'divine right' and many were the lessons of cruelty and lack of appreciation of the rights of others cultivated in me."
Katherine Waller attended Arlington Institute for Girls in Alexandria, Virginia, after the Civil War. On July 19, 1876, she married Robert South Barrett (1851–1896), a young Episcopal minister fresh out of seminary, who had been recently assigned to the nearby Aquia Church. It was while traveling with and assisting her husband with his work in Virginia, Kentucky and Georgia, that she first witnessed the social problems which would form the impetus for her life's work.
In particular, soon after Robert South Barrett, Jr., the first of their six children, was born in Richmond, Virginia, a young unmarried woman with her own child begged for help at their door. The Barretts provided the young woman with a meal and listened as she told of being deserted by a man who had promised marriage. Barrett recognized the similarities between herself and the young woman, and concluded that only luck separated her from the young woman in her home; one of them had fallen in love with a "good" man and one with a "bad" one. Furthermore, from her own experiences as a slaveholder and with Jim Crow laws, Barrett also realized how spirits could be broken by degradation. Profoundly moved by her new-found bond with this "fallen" woman, she vowed, "By the power of God that rules the Universe, I would spend my life trying to wipe out some of the inequalities that were meted out to my sisters who were so helpless to help themselves."
When Rev. Barrett was assigned to Atlanta in 1886, Katherine Barrett, with his encouragement, pursued a medical degree, while also establishing what came to be her first shelter for unwed mothers. The Women's Medical College of Georgia awarded Barrett an M.D. in 1892 and a doctor of science degree in 1894. Barrett never intended to practice as a physician, but wanted to bolster her credibility: "she recognized that the initials 'M.D.' behind her name gave weight to her viewpoints."
While earning those degrees and working on numerous charitable causes, Barrett also raised six children, with the considerable assistance of a black nanny. Her husband's health, never robust, began failing, and they returned to the Alexandria area while he was assigned in Washington D.C., and later traveled to Europe to seeking cures. Thus, Barrett also studied nursing at the Florence Nightingale Training School in London, England. However, Rev. Barrett died in 1896, leaving his 39-year-old widow with six young children.