Aqa Ali Shah was born in 1830 at Mahallat in Iran. He was the eldest son of Aga Khan I and the only surviving male issue of his father with Sarv-i Jahan Khanum (, d. 1882). Aqa Ali Shah was a member of the Iranian royal family, as his mother was the daughter of Fat′h Ali Shah, the second ruler of the Qajar dynasty. His rank as a prince of the royal family was also recognized by Nasser al-Din Shah Qajar when Aqa Ali Shah's father died. Nasser al-Din himself carried out a ceremony performed among Persian princes to mark the end of mourning of deceased relations. In addition, Nasser al-Din sent a robe of honour and the emblem of the Persian Crown studded with diamonds to Aga Ali Shah as a sign of the Shah's relationship with the Aga Khan's family.
