Leone was born Karen Malhotra in Sarnia, Ontario to Sikh Punjabi parents from India. Her father was born in Tibet and raised in Delhi, while her mother (who died in 2008) was from a small town named Nahan in Sirmaur, Himachal Pradesh. As a young girl, she was very athletic and played street hockey with the boys, enjoyed ice skating on a nearby frozen lake and drinking hot chocolate in front of a fire after playing in the snow all day.
Though she was raised as a sikh, her parents enrolled her in a Catholic school, as it was felt to be unsafe for her to go to public school. There she had her first kiss at 11, lost her virginity to a basketball player at another school at 16, and found out she wasbisexual at 18. When she was 13, her family moved to Fort Gratiot, Michigan, then to Lake Forest, California a year later, fulfilling her grandparents' dream that the family be together in one place. She graduated from high school in 1999 and enrolled in college.
In June 2006, Leone became an American citizen, but plans to remain a dual citizen of Canada. Although bisexual, she has stated that she prefers men. In her spare time she enjoys abstract paintings, horse riding, reading, playing World of Warcraft, watching The Simpsons and theDiscovery Channel. She used to play on a women's soccer league team in California. Her favorite holiday destination is Hawaii, and her favorite cuisine is Italian.
In separate interviews, she has stated that in ten years' time she would like to be married and have started a family, and probably retire from the industry by the time she is 30. Leone was engaged to Matt Erikson, a vice-president of marketing at Playboy Enterprises. She currently resides in Hollywood, California with her cat and drives an Audi A5.
A 2008 Eye Weekly article reported that "Leone does her best to maintain a link to Sikh traditions, even if more in theory than in practice. But she's unlikely to disavow her career path due to religion." and that Leone said "Girls will leave the industry claiming that they found God. Well, the fact is, God has always been with them the entire time." In a 2010 interview, she said "It’s a community-based religion. You walk into a temple and you’re greeted with the utmost respect... But, just like any religion it doesn’t want you to shoot adult material. I mean, I grew up going to temple every Sunday. When my parents found out they knew my personality which was very independent. Even if they tried to stop me or tried to steer me the right way they would have lost their daughter. I’m too headstrong. And it wasn’t a plan. It just happened and my career and everything just kept getting bigger and bigger."