Danes' father was born in Austin, Texas, in 1944 and, after studying Biology and Civil Engineering at Brown University, received a Bachelor of Fine Arts in Photography from Rhode Island School of Design (1968), where he studied with Harry Callahan. During Danes' childhood her father worked as a general contractor for 20 years, working on residential buildings in a company he ran called Overall Construction in New York. He also worked as a Photographer and computer consultant. He is the son of Gibson Andrew Danes, a former dean of the Yale School of Art and Architecture from 1958 to 1968. Danes is named after her paternal grandmother, Claire Danes (née Tomowske), who died in 1953.

Danes' parents met when they were studying at the Rhode Island School of Design. Danes' mother was born in Elizabeth, New Jersey, in 1945 and has a Bachelor of Fine Arts in Painting and Education from Rhode Island School of Design (1967), an Associate of Applied Science in Textile Design from Fashion Institute of Technology (1971), a master's degree in Early Childhood Education from Hunter College (1987), and a Master of Fine Arts from Otis College of Art and Design (2002). During Danes' childhood her mother ran a small toddler day-care center called Danes Tribe out of the family's SoHo loft to supplement her work as a Painter and textile designer, and later served as Danes' manager.

Danes played a teenage murderer in a guest starring role on Law & Order in the season three episode "Skin Deep." She appeared in an episode of HBO's Lifestories: Families in Crisis entitled "The Coming out of Heidi Leiter". In March 1993, a pilot episode was shot, when she was 13 years old. It would be almost another year and a half before broadcast.

Danes played Beth March in the 1994 film adaptation of Little Women. Although ABC canceled My So-Called Life in 1995, the show helped her to receive more film roles, including 1995's Home for the Holidays and 1996's I Love You, I Love You Not and To Gillian on Her 37th Birthday.

She then starred as the 15-year-old Angela Chase in the television drama series My So-Called Life, starring in the show and providing voiceovers for 17 of the series' 19 episodes, including the pilot episode. For her role, she won a Golden Globe Award and received an Emmy nomination. Despite being canceled after only 19 episodes, My So-Called Life has developed a large cult following. In 1995, she starred in the Soul Asylum music video for "Just Like Anyone".

Her first leading role on the big screen came in 1996, when she portrayed Juliet in the film Romeo + Juliet, inspiring Director Baz Luhrmann to call her, at age 16, "the Meryl Streep of her generation." Later that year, it was reported that she turned down the female lead role in Titanic.

Danes met Australian singer Ben Lee at her birthday party in 1997. They dated for almost six years before their relationship ended in 2003. In 2004, Danes began a relationship with former Princess Mononoke and Stage Beauty co-star Billy Crudup that lasted until 2006. The relationship garnered much negative press, as Crudup left Actress Mary-Louise Parker while she was pregnant with their son.

In 1998, she played several very different roles: Cosette in Les Misérables, and the pregnant teenage daughter of Polish immigrants in Polish Wedding.

In 1999, she made her first appearance in an animated feature with the English version of Princess Mononoke. That same year, she played the role of Julie Barnes in the big screen adaptation of the 1970s TV show The Mod Squad. She also starred in Brokedown Palace.

Danes got her start in New York City theater appearing in performances of Happiness, Punk Ballet, and Kids Onstage, for which she choreographed her own dance. In April 2000, she appeared off Broadway in Eve Ensler's The Vagina Monologues. In November of that same year, she appeared as Emily Webb in a one night only staged reading of Thornton Wilder's Our Town at All Saint's Episcopal Church in Beverly Hills. The production was staged by Bess Armstrong, who had played the mother of Danes' character on My So-Called Life.

Danes left her career temporarily to attend Yale, having made 13 films in five years. In 2002, she returned to film. She starred in Igby Goes Down. Later that year, she co-starred as Clarissa Vaughan's (played by Meryl Streep) daughter in the Oscar-nominated film The Hours. The following year, she was cast in Terminator 3: Rise of the Machines, followed by Stage Beauty in 2004. She earned critical acclaim in 2005 when she starred in Shopgirl and The Family Stone. In 2007, she appeared in the fantasy Stardust, which she described as a "classic model of romantic comedy". She appeared in the drama film Evening and The Flock. She was also featured in the film Me and Orson Welles.

In September 2005, Danes returned to New York's Performance Space 122, where she had performed as a child. She appeared in Choreographer Tamar Rogoff's solo dance piece "Christina Olson: American Model", where she portrayed the subject of Andrew Wyeth's famous painting Christina's World. Olson suffered from muscular deterioration that left her weak and partially paralyzed. Danes was praised for her dance skills and acting in the project.

Danes met actor Hugh Dancy on the set of Evening in 2006 in Newport, Rhode Island. They began dating and announced their engagement in February 2009. They married in France in a secret ceremony in late August or early September 2009. They have one child, a son named Cyrus (born 2012). They live in the West Village neighborhood of New York City.

In January 2007, Danes performed in Performance Space 122's Edith and Jenny. Later in 2007, Danes made her Broadway theatre debut as Eliza Doolittle in the Roundabout Theatre Company revival of George Bernard Shaw's Pygmalion, directed by David Grindley at the American Airlines Theatre.

In 2010, Danes starred in the HBO production of Temple Grandin, a biopic about the eponymous woman with autism. She won the 2010 Emmy Award for Outstanding Lead Actress in a Miniseries or a Movie, the 2011 Golden Globe Award for Best Actress – Miniseries or Television Film and the 2011 Screen Actors Guild Outstanding Performance by a Female Actor in a Television Movie or Miniseries award. The film was well received and Grandin herself praised Danes' performance.

Since 2011, Danes has starred as Carrie Mathison in the Showtime series Homeland in which she plays an agent of the CIA who has bipolar disorder. Her character believes a United States Marine Corps war hero is planning a terrorist attack while being tapped for high-profile government Service. The series costars Mandy Patinkin and Damian Lewis. She won the 2013 Golden Globe and the 2012 Golden Globe for Best Actress in a Television Series for her performance. She also won the 2012 and 2013 Emmy for Outstanding Lead Actress in a Drama Series for her performance in Homeland. In 2012, TIME magazine named Danes one of the 100 most influential people in the world.

In 2012, Danes's audiobook recording of Margaret Atwood's The Handmaid's Tale was released at Audible.com. Her performance won the 2013 Audie Award for fiction.

She hosted the 2013 Nobel Peace Prize Concert in Oslo.

In 2015, Danes was awarded a star on the Hollywood Walk of Fame.

In March 2016, Danes performed in Dry Powder by Sarah Burgess at The Public Theater, starring alongside John Krasinski, Hank Azaria and Sanjit De Silva. The play was directed by Thomas Kail.