He was born to Irish parents in Detroit, where he attended Cass Union High School.
An apprentice engineer from the age of thirteen, he moved to Australia around 1873 and worked as a machinery agent for a number of Sydney businesses.
In 1891 he was elected to the New South Wales Legislative Assembly for Canterbury as one of the first group of Labor Party politicians.
However, by 1894 he had left Labor after refusing to sign the pledge, and he was defeated in Petersham as an independent Free Trade candidate.
Danahey's final appearance in Australian politics was as the Labor candidate for Belubula at the 1910 New South Wales state election.