The actress, who portrays destitute single mother Fantine in the musical adaptation, told The Mirror that her transformation was a traumatic experience.
Hathaway admitted that it was one of the hardest decisions she has made for her career.
Speaking of her initial reaction, she said: "I called my husband [Adam Shulman] and was on the phone with him. I looked in the mirror and I said 'I look like my gay brother. I'm just Man Hathaway'.
"I realised I couldn't take it back. It had the effect of changing my identity. I was reduced to a mental patient level of crying... I was inconsolable."
She continued: "I put it up there with the most difficult things I've ever had to do, which I wasn't expecting. I didn't think I was that vain.
"There was nothing I could do to prepare for it. You train the stunt, you sing the song, you train your voice.
"This was just letting it happen and accepting whatever the results were going to be."
Hathaway offered to cut her hair for the scene after reading the script, which sees Fantine driven to sell her hair and teeth in an attempt to provide for her child.
The Dark Knight Rises actress said: "When I got cast and I read the script, and I knew they were keeping the hair cutting in, and then I read the book and it's such a devastating scene, I thought doing it for real might raise the stakes a bit.
"And I guess in the back of my mind, I thought it if was a painful experience watching her haircut, then watching her teeth get pulled would be really painful."
She added: "And as an actor, it was great to be able to authentically communicate a physical transformation."
Watch a trailer for Les Misérables below: