Grace, eldest of three children, was born in Worthington, Ohio, a suburb of Columbus, the daughter of Linn and Rick Denig. She took to acting at an early age, performing in several local theatre productions, among them Jewish Community Center's Gallery Players' 2000 production of The Crucible. The director of that play, John S. Kuhn, said of Grace "Even at that young age she brought a lot to her work."

At 16, Grace left Ohio with her mother, Valinn, for Los Angeles. The actress frequently found herself struggling to pay her rent. In 2001 she landed the eponymous role in the Sony Pictures web-serial Rachel's Room, which took the form of a teenager's video journal. In all, she appeared in 56 short videos dialoguing teen angst and her conflict with her mother and school teachers.