Baldwin was born in Massapequa, New York, the son of Carol Newcomb (née Martineau), a breast cancer survivor who founded the Carol M. Baldwin Breast Care Center of the University Hospital and Medical Center at Stony Brook, and Alexander Rae Baldwin, Jr., a high school history/social studies Teacher and football coach. Baldwin was raised in a Catholic family and has English, Irish, Scottish, French-Canadian, and German ancestry. In addition to his three famous actor brothers, Alec (born 1958), william (born 1963), and Stephen (born 1966), Baldwin has two sisters, Beth Baldwin Keuchler (born 1955) and Jane Baldwin Sasso (born 1965).

Baldwin was a standout high school football and basketball player and graduated in 1979 from Alfred G. Berner High School in Massapequa. He also attended McKenna Junior High School.

In 1984, Baldwin had a daughter, Kahlea, with his first wife, Cheryl. In 1990, he married Actress Elizabeth Baldwin and they had a daughter, Alexandra, in 1994, before divorcing in 1996. Alexandra moved to England with her mother and stepfather and now lives in Bonita Springs, Florida. Baldwin was involved for a decade with his Homicide: Life on the Street co-star, Chicago-born Actress Isabella Hofmann. They have a son, Atticus, who was born in July 1996, is named after the Lawyer in To Kill a Mockingbird, and has autism. Baldwin was married to Joanne Smith, a former British model, with whom he had a daughter, Avis Ann, in 2008. The couple have a second daughter, Finley Rae Martineau, born in 2009. In 2011, Baldwin and his wife announced that they had dropped their divorce filings and were attempting to reconcile. However, in 2012, Joanne filed for divorce again. In November 2014, Baldwin announced his engagement to Robin Sue Hertz Hempel, an Entrepreneur.

Baldwin's acting debut was in the television film Too Good to Be True in 1988, which he followed with roles in the films Born on the Fourth of July (1989), Harley Davidson and the Marlboro Man (1991) and Hero (1992). He returned to television in 1990 for the short-lived sitcom Sydney, which starred Valerie Bertinelli.

In 1993, Baldwin was cast in the Baltimore-based cop show Homicide: Life on the Street. Although he received good reviews he left in 1995 after three seasons, and his character was later killed off. He returned to TV movies such as Attack of the 50 Ft. Woman, Family of Cops, and Twisted Desire, as well as the 1996 feature films Mulholland Falls and Trees Lounge.

In 1998, Baldwin was found running naked through the halls of New York's Plaza Hotel shouting "Baldwin!" and was arrested for possession of cocaine. He pleaded guilty to disorderly conduct and was sentenced to three months in drug rehab. He later told People magazine that he had been battling a cocaine addiction since 1989.

Baldwin returned to appearances in various TV series episodes, including The Sopranos and TV and direct-to-video movies, including reprising his role as Beau Felton in Homicide: The Movie in 2000. Baldwin then starred in TV movies such as Anonymous Rex (2004) and Our Fathers (2005) and small-budget films including Sidekick (2005) and Moola (2006).

In 2005, he was featured in VH1's Celebrity Fit Club, a reality show in which overweight celebrities compete to see who can shed the most pounds. He was the team captain of the Eastsiders, which also featured Rapper Biz Markie, plus-size model Mia Tyler, and actor Joe Gannascoli (later traded for Judge Mablean Ephriam from Divorce Court).

According to TMZ.com, on November 7, 2006, Baldwin was arrested in Santa Monica, California, after allegedly stealing a white GMC Yukon SUV. The actor was taken to jail and booked for investigation of Grand Theft Auto; bail was set at $20,000. "The car belongs to an acquaintance of Mr. Baldwin, but he had no permission to take it", said Jim Amormino, a spokesman for the Orange County Sheriff's Department. The charges were subsequently dropped.

Baldwin starred on the VH1 reality television show Celebrity Rehab with Dr. Drew, filmed in 2007, but left the show after the fourth episode. His stated reasons for leaving included having a prior commitment to an acting job and the others' behavior interfering with his recovery. It was eventually reported that he left because of inappropriate text messages he had sent to Mary Carey, a fellow patient in his treatment group.

In 2008, Baldwin appeared on VH1's reality series Celebrity Rehab with Dr. Drew#Season 1. In June 2009, he joined the cast of I'm a Celebrity... Get Me out of Here!, with his brother Stephen Baldwin. He was the second one voted off. As of 2011, Baldwin makes appearances on truTV's The Smoking Gun Presents: World's Dumbest.

In 2009, Baldwin moved to Lake Oswego, Oregon, a suburb of Portland, to start a production company, Grilletto Entertainment.

Baldwin was featured in UniGlobe Entertainment's breast cancer docu-drama titled 1 a Minute in 2010. The documentary was made by Actress Namrata Singh Gujral and featured breast cancer survivors Olivia Newton-John, Diahann Carroll, Melissa Etheridge, Namrata Singh Gujral, Mumtaz, and Jaclyn Smith as well as william Baldwin, Daniel Baldwin, and Priya Dutt. The film also starred Bárbara Mori, Lisa Ray, Deepak Chopra and Morgan Brittany.

In 2014, Baldwin appeared on the first episode of Celebrity Wife Swap. His girlfriend swapped with the wife of Jermaine Jackson.

On August 27, 2015, Baldwin entered the Celebrity Big Brother house as a contestant representing the USA. On September 4, he was the first housemate evicted after receiving the fewest votes to stay; he lasted for 9 days. He had received four nominations, with other contestants complaining about his ego and booming voice.

In June 2017, Baldwin relocated to Cleveland, New York, to be closer to extended family. He currently hosts his own ESPN radio show "The Daniel Baldwin Show" on WTLA in Syracuse..