Born Joseph Aloysius Dwan in Toronto, Ontario, Canada, Dwan, was the younger son of commercial traveller of woolen clothing Joseph Michael Dwan (1857–1917) and his wife Mary Jane Dwan, née Hunt. The family moved to the United States when he was seven years old, on 4 December 1892, by ferry from Windsor to Detroit, according to his naturalization petition of August 1939. His elder brother, Leo Garnet Dwan (1883–1964), became a physician. At the University of Notre Dame, Allan Dwan studied engineering and began working for a lighting company in Chicago. However, he had a strong interest in the fledgling motion picture industry and when Essanay Studios offered him the opportunity to become a scriptwriter, he took the job. At that time, some of the East Coast movie makers began to spend winters in California where the climate allowed them to continue productions requiring warm weather. Soon, a number of movie companies worked there year-round and, in 1911, Dwan began working part-time in Hollywood. While still in New York, in 1917 he was the founding President of the East Coast chapter of the Motion Picture Directors Association.