Arbuthnot was born on 7 October 1802 at Queen Street in Edinburgh, Scotland into Clan Arbuthnott.

He was the second son of Sir William Arbuthnot, 1st Baronet (1766–1829) and Anne Alves (d. 1846).

His paternal grandparents were Robert Keith Arbuthnot, FRSE of Haddo Rattray, and Mary Urquhart of Cromarty.

Originally starting as a general merchant business, it soon began involving itself in finance and lending operations.

[8] Through his son George, he was a grandfather of, among others, John Bernard Arbuthnot, who married Olive Blake (the only daughter of Sir Henry Arthur Blake and Edith Bernal Osborne, sister of the Duchess of St Albans),[6] and Dorothy Gertrude Arbuthnot (who married Brig.-Gen. Hugh Frederick Bateman-Champain).