Pillai was born the daughter of Raymond Pillai and his wife Durr-e-shahwar Dhanrajgir. Both of her parents were of mixed communal heritage, and theirs was also a mixed marriage. Her father, Raymond Pillai, was the son of a Malayalam-speaking Nair father and an Anglo-Indian mother, and he was raised as a Christian. Pillai's mother, Durr-e-shahwar Dhanrajgir, was the daughter of Maharaja Narsinghraj Dhanrajgir Gyan Bahadur, a Hindu and one of the top noblemen of Hyderabad state, by his consort Zubeida, a small-time Actress who hailed from a family of Muslim royals and who had acted in the first Indian sound film Alam Ara (1931).
In 1998, Pillai married actor Sanjay Dutt, but they separated after a few years. She stated in 2006 that they remain close friends. After the divorce became official in 2008 and details of the settlement were published by the tabloid MiD DAY, the broadsheet newspaper The Telegraph criticised Pillai for her materialism and her conduct in relation to Dutt.
Pillai had a live-in-relationship with Indian tennis player Leander Paes in 2005. The couple has a daughter, Aiyana. She has filed a case against Paes and his father alleging domestic violence in June 2014 at a local metropolitan court.