Valdemar was the eldest son and co-ruler of Valdemar II of Denmark by his first wife, Dagmar of Bohemia. He did not outlive his father so was never a sole monarch. He is sometimes referred to as Valdemar III for example his tombstone reads in Latin: Waldemarus Tertius Rex Daniae, Filius Waldemari Secundi "Valdemar the Third, King of Denmark, son of Valdemar the Second". Although Valdemar III is more commonly used to denote a later king, Valdemar of Schleswig.

Valdemar was born in 1209. He was the eldest child from his father's first marriage. His mother, Queen Dagmar, died in childbirth in 1212, leaving her husband a widower with a young son; she had been very popular among the Danish people due to her piety and kindness to the common people.

King Valdemar remarried two years later to Berengaria of Portugal. From this marriage Valdemar the Young gained four half-siblings: Sophie, Eric, Abel and Christopher. His new stepmother, a beautiful and haughty woman, unpopular and scorned by the Danish people, was a great contrast to Valdemar's mother Dagmar. When Berengaria died in childbirth herself in 1221, King Valdemar did not remarry.

At a meeting of the Danish magnates, which King Valdemar arranged at Samsø in 1215, everyone agreed to swear an oath to Valdemar the Young, and shortly after he was elected co-king of Denmark at Viborg landsting, a practice originally practised by the French Capetian dynasty and later in many of European monarchies. Valdemar's Duchy of Schleswig passed to his younger brother Eric.

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