Liu Penzi was a descendant of the Western Han prince Liu Zhang, Prince Jing of Chengyang, from whose principality many Chimei men came. The people of the principality had long worshipped Prince Zhang as a god. Penzi's grandfather Liu Xian (劉憲) was created the Marquess of Shi by Emperor Yuan, and Penzi's father Liu Meng (劉萌) inherited the march after Marquess Xian's death. When Wang Mang usurped the Han throne and established the Xin Dynasty in 8, the march was abolished.
Penzi was the youngest of three brothers. His older brothers were Liu Gong (劉恭) and Liu Mao (劉茂). As Chimei forces rose late during the Xin Dynasty, the Liu brothers were forced into the Chimei to be child soldiers. Later, when the Chimei general
Fan Chong (樊崇) temporarily submitted to Gengshi Emperor's authority after Gengshi Emperor overthrew Wang Mang, Liu Gong accompanied Fan to the capital, Luoyang, and was created the Marquess of Shi to inherit his father's title. He did not accompany Fan when Fan later fled from Luoyang back to the Chimei stronghold of Puyang (濮陽, in modern Puyang, Henan), but remained a follower of Gengshi Emperor. Mao and Penzi remained in the Chimei forces and were made cattlemen.