Sarah Hathaway Bixby Smith was born at Rancho San Justo near San Juan Bautista, California, in 1871. Her parents were Llewellyn Bixby, a rancher, and Mary Hathaway Bixby. Llewellyn Bixby was a sheepman, and with other members of the Bixby family had come to California in 1852, driving sheep and cattle from the East. Llewellyn, together with his brother Jotham and three cousins (John William Bixby, Thomas Flint, and Benjamin Flint), formed the Flint-Bixby Company in 1855 to buy land to run their livestock. By the mid-1880s they had amassed large landholdings: in addition to Rancho San Justo were Rancho Los Cerritos and Rancho Los Alamitos in Long Beach, California (both now run as museums), Rancho San Juan Cajón de Santa Ana, and part of Rancho de los Palos Verdes. Sarah spent her childhood on the San Justo, Los Cerritos, and Los Alamitos ranches.  

In 1909, when Bixby Smith discovered that her husband had been having an affair with the children's au pair, she helped him to get a new position in northern California at the First Unitarian Church in Berkeley. Smith's life became more complicated when she got romantically involved with Paul Jordan-Smith, a married minister at the same church, who was also a graduate student in the English Department at the University of California, Berkeley. When their liaison was discovered, the English Department faculty voted not to renew his fellowship.