Davalos was born in Paris, France to American parents, photographer Jeff Dunas and actress Elyssa Davalos, daughter of actor Richard Davalos. Davalos spent most of her childhood in France and Italy, before settling in New York. She has stated "I tend to curse in French more often than I do in English."
She is of Spanish and Finnish descent on her mother's side. Her father's family is Jewish (her paternal ancestors lived in Vilnius in Lithuania). She was raised "without much religion", though she attended Hebrew school for a time.
Davalos struck out on her own at seventeen and moved to New York City. She supported herself by modeling for photographers like Peter Lindbergh. "I had a mission," she recalls. "I wanted to be out in the world, doing my own thing. Working in a theatre, I discovered that I really wanted to act." Her passion soon grew towards acting, and she attended the Off-Broadway Flea Theater in New York. She kept her acting plans from her family until her career started to take off.

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