Arun Khetarpal was born in Pune, Maharashtra on 14 October 1950. His family belonged to Sargodha, Pakistan, and had migrated to India after partition as refugees. His father Lt Col (later Brigadier) M. L. Khetarpal was a Corps of Engineers officer serving in the Indian Army and his family traced a long history of military service. Attending The Lawrence School, Sanawar, he distinguished himself both as an able student and sportsman and was the school prefect. Khetarpal joined the National Defence Academy in June 1967. He belonged to Foxtrot Squadron where he was the Squadron Cadet Captain of the 38th Course. His NDA No was 7498/F/38. He subsequently went on to join the Indian Military Academy. In June 1971, Khetarpal was commissioned into the 17 Poona Horse.