Edward Kenneth Daniels was born on October 19, 1941, in New York City, to a Jewish family; his mother had emigrated from Romania, and he grew up in the Manhattan Beach neighborhood of Brooklyn. His father, a garment worker who had once played music, gave him a saxophone when he was nine, and by 13 he was also playing clarinet. As a teenager he was drawn to jazz by the musicians who accompanied singers such as Frank Sinatra on record. He studied with Aaron Sachs and Ray Musiker, then with Jimmy Abato at the High School of Performing Arts, and later with the clarinet teachers Daniel Bonade and Joe Allard. In Marshall Brown's youth band he played alongside Eddie Gomez, Ronnie Cuber and Alan Rubin, and at 15 he took part in the youth competition at the Newport Jazz Festival.

He studied education at Brooklyn College, worked as a substitute teacher in the New York City schools while playing club dates, and earned a master's degree in clarinet at Juilliard in 1966. Early professional work included Broadway pit orchestras, among them Mame, whose pit book called for flute and sent him to flute teachers. The saxophonist Tony Scott hired him for a date at the Half Note, where Thad Jones and Mel Lewis heard him, and Lewis phoned when the two were forming a new orchestra to play Monday nights at the Village Vanguard. In the same year, 1966, Daniels paid his own way to Vienna and won first prize on saxophone at the International Competition for Modern Jazz, organized by the pianist Friedrich Gulda.

Daniels stayed with the Jones and Lewis orchestra for six years, playing tenor saxophone, clarinet and flute and touring Europe with the band; a clarinet solo on its Live at the Village Vanguard helped win him DownBeat's New Star on Clarinet award in 1968. His first record as a leader, First Prize! (Prestige, 1967), paired him with pianist Roland Hanna, bassist Richard Davis and Lewis, and This Is New, recorded on August 4, 1968, and issued in Japan by Nippon Columbia, put him with trumpeter Terumasa Hino, pianist Masabumi Kikuchi, bassist Kunimitsu Inaba and drummer Motohiko Hino. After the orchestra years he became a busy New York session player, appearing on records by Freddie Hubbard, Richard Davis, Don Patterson, Yusef Lateef, Airto Moreira, George Benson, Bob James, Eric Gale, O'Donel Levy, Paul Simon and Billy Joel. Under his own name he made the duo album A Flower for All Seasons (Choice, 1973) with guitarist Bucky Pizzarelli, Brief Encounter (recorded July 11, 1977, at Van Gelder Studio in Englewood Cliffs, New Jersey, and issued on Muse), Street Wind (1978), arranged and produced with Don Sebesky, and Morning Thunder for Columbia (1980). Tenor saxophone was his main horn through the 1970s; in the early 1980s he stopped playing saxophone to concentrate on clarinet, and he returned to doubling on tenor in the late 1990s.

His breakthrough as a clarinetist came on GRP, the label founded by Dave Grusin and Larry Rosen. Breakthrough (1985) set him with the Philharmonia Orchestra under Ettore Stratta in a program that ran from C.P.E. Bach's "Solfeggietto" to a three-movement concerto for jazz clarinet and orchestra. A run of GRP albums followed: To Bird with Love (1987), a Charlie Parker tribute with pianist Fred Hersch, bassist John Patitucci and drummer Al Foster; Memos from Paradise (1988), built on the music of Roger Kellaway; Blackwood (1989); Nepenthe (1990); This Is Now (1991); Benny Rides Again (1992), a tribute to Benny Goodman made with vibraphonist Gary Burton; and Under the Influence (1993). Kellaway's arrangement of "Memos from Paradise," performed by Daniels, won the Grammy for Best Arrangement on an Instrumental at the 1989 ceremony. Daniels also played in Grusin's GRP All-Star Big Band and on Arturo Sandoval's Swingin' (1996), and he recorded classical repertoire, among it the Weber and Brahms clarinet quintets with the Composers String Quartet for Reference Recordings and Blues for Sabine, made with the German clarinetist Sabine Meyer and her Trio di Clarone for EMI Classics. In 2009 the Swiss composer Daniel Schnyder wrote a clarinet concerto, Matrix 21, for him, premiered in Lausanne in January 2010.

Daniels later settled in Santa Fe, New Mexico. Much of his recording from the mid-2000s came from IPO Recordings, which set out to bring him back to straight-ahead jazz and to tenor saxophone: Mean What You Say (2005, billed to his quartet, with pianist Hank Jones, bassist Richard Davis and drummer Kenny Washington), Homecoming (live at the Iridium, 2007), and a series of duo records with Kellaway, A Duet of One, Live at the Library of Congress and Duke at the Roadhouse: Live in Santa Fe (2013). Duke at the Roadhouse won the Grand Prix of the Académie du Jazz, the French academy's album of the year, for 2013. On Resonance Records came Just Friends: Live at the Village Vanguard (2017), an archival duo set with Kellaway recorded at the club on November 26, 1988; Heart of Brazil (2018), a tribute to Egberto Gismonti that was nominated for the Grammy for Best Latin Jazz Album at the 2019 ceremony; Night Kisses (2020), a tribute to Ivan Lins with Grusin and Bob James as guests; and To Milton With Love (2025), a re-creation of Milton Nascimento's 1969 album Courage in which Daniels's clarinet and saxophones take the place of the voice, backed by a string quartet. In 2012 he was billed to play Copland's Clarinet Concerto, written for Goodman, with the London Symphony Orchestra at the Barbican Hall, and his own website lists a lessons program.

Daniels is one of the few clarinetists to have built a recording career in both jazz and classical music without treating either as a sideline, and he has said that Mozart and Charlie Parker can share a program. On clarinet he plays written concert music and improvised jazz on the same instrument, often on the same album, and his GRP albums were credited with renewing interest in the clarinet as a modern jazz voice. His tenor playing, which dominated his early records and the Thad Jones and Mel Lewis years, comes from the New York big-band and small-group jazz tradition, and he returned to it on the IPO and Resonance dates. Benny Goodman is a clear reference point, through Benny Rides Again and the Copland concerto written for Goodman, and To Bird with Love shows the bebop side. The Brazilian tribute records of the past decade, on the music of Gismonti, Lins and Nascimento, extend the same habit of crossing repertoires. DownBeat named him New Star on Clarinet in 1968, Kellaway's arrangement for him won a Grammy in 1989, and the Académie du Jazz honored the Kellaway duo record in 2013.