Dietz was born on January 26, 1980 in Aurora, Colorado to German American parents Cindy and Daniel P. Dietz Sr. He also had Apache ancestry. He graduated from Heritage High School in Littleton in 1999.

Dietz joined the Navy on August 31, 1999, and following his graduation from basic training at the Recruit Training Command, Great Lakes, Illinois, he finished Gunner’s Mate “A” School also at Great Lakes. From that point on, he enrolled in Basic Underwater Demolition/SEAL training (BUD/S) and graduated with Class 232 in 2001. Dietz proceeded to the Basic Airborne Course at Fort Benning in Georgia, after which he completed SEAL Qualification Training and SEAL Delivery Vehicle Training. Shortly after checking in at SEAL Delivery Vehicle Team 2 in Virginia Beach, Virginia, on November 8, 2001, he was appointed to Task Unit Bravo as the optional SDV pilot and the ordnance and engineering department head. In April 2005, Dietz was deployed with his Special Reconnaissance component to Afghanistan to help Naval Special Warfare Squadron TEN in the indictment of the Global War on Terrorism.

Operation Red Wings was a counter-insurgency operation by the United States Armed Forces to kill or capture Ahmad Shah, (code name Ben Sharmak), a known terrorist and head of the militia, “Mountain Tigers”. The operation was carried out, on 27 June 2005, by Navy SEAL Team TEN; the four-man team was made up of 2nd Class Matthew G. Axelson and 2nd Class Marcus Luttrell supporting the role of snipers while 2nd Class Danny P. Dietz and team leader Navy Lieutenant Michael P. Murphy were spotters.

Dietz’s body was found by a group of U.S. Air Force pararescuemen during a search and rescue operation, on 4 July 2005, and returned to the United States. Dietz was buried with full military honors at Fort Logan National Cemetery in Denver, Colorado.

On September 13, 2006, Dietz was posthumously awarded the Navy Cross by Navy Secretary Donald C. Winter.

On July 4, 2007 the town of Littleton, Colorado erected a bronze lifesize statue of Dietz holding his rifle in a ‘parade-rest’ position on one knee. It contained the same statement on the Navy Cross citation.

On August 18, 2009, the span of South Santa Fe Drive between Interstate 25 and Colorado State Highway 470 was named Navy SEAL Danny Dietz Memorial Highway in his honour.

Starting in 2010, the Danny Dietz Memorial Day Classic is a fundraiser / rodeo event held the weekend of Memorial Day at the Fort Bend County Fairgrounds in Rosenberg, Texas.

For the 2013 film Lone Survivor, which covered the events of Operation Red Wings, Dietz was portrayed by actor Emile Hirsch.