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Carangi was born in Philadelphia, Pennsylvania. She was the third and youngest child of Joseph, a restaurant owner, and Kathleen (née Adams) Carangi, a homemaker. She had two older brothers. Her father is Italian, and her mother is of Irish and Welsh ancestry. Joseph and Kathleen had an unstable, violent marriage leading Kathleen to ultimately abandon the family when Carangi was eleven years old.[2] Those who knew her blamed her "fractured childhood" for the instability and drug-dependence that plagued her adult life.[2] She was described as "needy and manipulative" by relatives who recalled her as spoiled and shy as a child and a "mommy’s girl" who did not receive the motherly attention that she desired.[2]

In her adolescent years, Carangi found the attention she sought from other teenage girls, befriending them by sending flowers.[2] While attending Abraham Lincoln High School, Carangi bonded with "the Bowie kids", a group of obsessive David Bowie fans who emulated Bowie's "defiantly weird, high-glam" style.[2] Carangi was drawn to Bowie for his fashion preferences and his ambiguous gender play and outspoken bisexuality.[2] One of Carangi's friends spoke of her "tomboy persona," describing her relaxed openness about her sexuality as reminiscent of the character Cay in the 1985 film Desert Hearts.[2] Carangi and her "bi-try Bowie-mad" friends hung out in Philadelphia’s gay clubs and bars. Though she associated with the lesbian community, she did not want to take up "the accepted lesbian style".[2]