Gary Clark and Ged Grimes were school friends in Dundee, Scotland and played together in various bands, eventually moving to London to seek their fortune. While still in London, Clark and Grimes noted that talent scouts and journalists were beginning to follow the music scenes in Scottish cities and so returned to Dundee, teaming up with Gary's younger brother Kit to form a new band called Spencer Tracy (after the film star of the same name). After much attention from labels following a glowing review in UK music publication Melody Maker, Spencer Tracy signed to Virgin Records in 1986. Following objections from the estate of the actor, the band was obliged to change its name and opted for Danny Wilson, taken from 1952 Frank Sinatra film Meet Danny Wilson, a favourite of the Clark brothers' father.

Their debut album, Meet Danny Wilson (written entirely by Gary Clark), was released in 1987. The lead single, Mary's Prayer, issued in the spring, was initially unsuccessful in the UK, peaking at number 86. However its US release that summer afforded Danny Wilson a surprise US Top 40 hit, peaking at number 23 on the Billboard Hot 100. The US success of Mary's Prayer led to its UK re-release, peaking at number 42 in the UK charts. After it topped a BBC Radio 1 phone-in poll of listeners' nominations for 1987 singles which had undeservedly failed to reach the upper UK chart, Virgin Records UK gave the single a second re-release, peaking at number 3.

The band released its second album, Be Bop Moptop, the following year, with all three members now contributing songs. The first single released from the album was Never Gonna Be the Same, but was overshadowed by its successor, the hit single The Second Summer of Love, which reached number 23 in the British charts. Three more singles were released from Be Bop Moptop but in spite of Virgin Records' promotional efforts, none of them were hits.

By 1991, all three were writing and demoing more songs than could fit onto an album, and after unsuccessfully asking Virgin to allow him to record a solo release Kit decided to leave the band. Gary decided that Kit's departure was the loss of a really good force, and opted to dissolve the band, with the songs Gary had composed for the album featuring on his only solo release to date, Ten Shorts Songs About Love in 1993, which also featured Kit and Ged as guest musicians.

A compilation album, Sweet Danny Wilson, was released by Virgin in 1991 (containing a bonus album of B-sides and live recordings called Three-In-A-Bed Romp). This was followed in 1995 by a compilation album entitled The Best Of Danny Wilson.

In 2025 the band joined with independent record label Cherry Red Records to release the 5-disc anthology Complete Danny Wilson, a career-encompassing box set which included all of the band's commercially released recordings; both studio albums, all of the b-sides and rare tracks which had featured on Sweet Danny Wilson, and for the first time commercially, the full recording of the band's 1st October 1989 show at the Town & Country Club (now known as the O2 Forum Kentish Town).