During in-concert band intros, Springsteen often referred to him as "Phantom," sometimes said to be because of an incident in Asbury Park in the 1960s where Federici evaded a police crackdown that resulted in the arrest of numerous others. Federici attended high school at Hunterdon Central High School in New Jersey. When he, along with Vini Lopez started the band Child at the end of the 1960s, their choice for a singer fell on Bruce Springsteen; Federici also joined Springsteen in other early efforts such as Steel Mill.
Federici's organ fills are a key component in the E Street sound, and sometimes take on a more prominent role, such as on the hit "Hungry Heart". His use of the electronic glockenspiel is also an easily recognized E Street element; he subsequently used electronic keyboards to simulate the glockenspiel sound. Another notable performance is his accordion solo on "4th of July, Asbury Park (Sandy)". It was reported in an interview in Backstreets magazine that Federici did not have the best working relationship while playing with pianist David Sancious in the early days of the E Street Band; Sancious would comment on Federici's parts, constantly telling him what to play and what not to play. Federici married Kathlynn Helmeid, a flight attendant he had met on the Born in the USA tour, in Janesville, Wisconsin in 1987. After years of failed adoption attempts, they adopted two daughters, Madison and Harley. The couple separated in 2000 and divorced in 2002. Kathlynn suffered from Crohn's disease and died in 2007. On November 21, 2007, it was announced that Federici would take a leave of absence from Springsteen and the E Street Band's ongoing Magic Tour to pursue treatment for melanoma, and was temporarily replaced by veteran musician Charles Giordano Springsteen stated at the time: "Danny is one of the pillars of our sound and has played beside me as a great friend for more than 40 years. We all eagerly await his healthy and speedy return." Federici made his only return to the stage on March 20, 2008, when he appeared for portions of a Springsteen and E Street Band performance at Conseco Fieldhouse in Indianapolis. Federici died on April 17, 2008 in New York having suffered for three years with melanoma. Federici's son, Jason Federici, daughters, Madison and Harley and fourth wife, Maya, survived him.