We connect density fluctuations in liquid water to lengthscale dependent crossover in hydrophobic hydration. Specifically, we employ indirect umbrella sampling (INDUS) simulations to characterize density fluctuations in observation volumes of various sizes and shapes in water and as a function of temperature and salt concentration. Consistent with previous observations, density fluctuations are Gaussian in small molecular scale volumes, but they display non-Gaussian “low-density fat tails” in larger volumes. These non-Gaussian tails are indicative of the proximity of water to its liquid to vapor phase transition and have implications on biomolecular interactions and function. We show that the onset of non-Gaussian fluctuations in large volumes is accompanied by the formation of a cavity in the observation volume. We develop a model that uses the physics of cavity-water interface formation as a key ingredient and show that it captures the nature of non-Gaussian density fluctuations over a broad region in water and in salt solutions. We discuss the limitations of this model in the very low density region of the distribution. Our calculations provide new insights into the origins of non-Gaussian density fluctuations in water and their connections to lengthscale dependent crossover in hydrophobic hydration.