Born and raised in Oakland, California, Payton played high school basketball at Skyline High School, along with former NBA player Greg Foster, and headed north in 1986 to attend Oregon State University in Corvallis. In his sophomore year of high school, his grades plummeted and he was declared academically ineligible. His dad encouraged him to focus on school, and he was allowed to play again. Throughout his four-year career at Oregon State, he became one of the most decorated basketball players in school history.
During his senior season in 1989–90, Payton was featured in the cover story of Sports Illustrated on March 5 as the nation’s best college basketball player. He was a consensus All-American, a three-time All-Pac-10 selection, and both the Pac-10 Defensive Player of the Year and conference Freshman of the Year in 1987. He was the MVP of the Far West Classic tournament three times, the Pac-10 Player of the Week nine times, and named to the Pac-10’s All-Decade Team. At the time of his graduation, Payton held the school record for points, field goals, three-point field goals, assists, and steals – all of which he still holds today except for career three-point field goals. During his career at OSU, the Beavers made three NCAA Tournament appearances and one NIT appearance. He was elected into OSU’s Sports Hall of Fame in 1996.