Tatsuya first met the other Masquerade members at Alaya Shrine at the age of eight. His brother had left him at the shrine and told him to stay there and stay out of trouble while he (Katsuya) went to see the ongoing festival. At the shrine, Tatsuya met a little boy and they became friends there. They decided to play a game based on the sentai show "Phoenix Ranger Featherman," with Tatsuya as the Red Eagle and Jun as the Black Falcon. Jun and Tatsuya quickly became best friends, and did almost everything together. They exchanged keepsakes that had been given to them by their fathers - Tatsuya gave Jun his father's watch, and Jun gave Tatsuya his father's lighter. A white girl and a chubby boy from the sushi shop joined their game at some point, and they called their play group "The Masquerade".

The Masquerade saw a middle-school girl at the shrine one day, and adopted her as the unofficial fifth member of the Masquerade. Tatsuya and Jun were especially close to Big Sis, and promised each other to always protect her. She, for her part, taught them weird German poetry, mothered Jun, and taught the kids a game, "Persona," to show them what they were going to be when they grew up. Big Sis also was the first to comment that Jun and Tatsuya were like doppelgangers, the light and dark version of the same person. (Kind of a creepy thing to tell some kids, isn't it?)

The children all idolized and loved her like a real older sister, so the Masquerade was devastated when Big Sis announced that she was going to move away. The kids decided that if they locked Big Sis in Araya Shrine overnight, she couldn't leave them. When Tatsuya objected to this plan, they locked him in with her, and left, intending to return the next day and let them out.

That night, Big Sis and Tatsuya played together in the shrine while waiting for someone to come back and release them. Unfortunately, an insane student from Seven Sisters, Tatsuya Sudou the Channeler - the future King Leo - decided to burn down the shrine that night. When the shrine was set on fire, Tatsuya escaped and tried to stop King Leo, but King Leo stabbed him in the back while Big Sis pounded on the shrine door from the inside. Tatsuya reacted by instinctively summoning his persona, Vulcanus, and burning away half of King Leo's face before passing out. King Leo fled the scene. Big Sis managed to escape the shrine with serious burns while Tatsuya was unconscious, but Tatsuya didn't know that; he presumed she had died and repressed his memories of the entire incident.

Soon after that, Tatsuya Suou's cop father was investigating the serial arsonist, and came close to fingering Tatsuya Sudou (King Leo) as the culprit. King Leo's father is a prominent politician, so he arranged for Mr. Suou to be framed and forced to resign from the police force in disgrace. Sudou threatened the Suou family, so Tatsuya's dad was forced to keep quiet about the circumstances surrounding his resignation. Tatsuya had idolized his father, and couldn't understand why his father had done something so cowardly. He was angry that his mother didn't protest and quietly accepted her fate. His older brother reacted by becoming a super-student and a perfect son and a dedicated cop, and nagged Tatsuya mercilessly about his grades (since, as we find out in EP, Katsuya is angry because he threw away his own dreams to support Tatsuya). Tatsuya grew to resent his perfect older brother and always felt inferior to him. Since he couldn't stand his entire family, he spent all his free time with part-time jobs, trying to earn enough money to become financially independent.

Tatsuya probably has one of the roughest deals of all the Megami Tensei protagonists; his "best ending" involves completely forgetting about all his friends and never seeing them again. And that's his reward for doing everything right! Otherwise, of course, the ideal "other world" he worked so hard to create for his friends would merge with the world where everything went wrong, and things would descend into madness again.