Danubio was founded by the Bulgarian born brothers, Miguel and Juan Lazaroff, on 1 March 1932 together with other youths from the "Republica de Nicaragua" school in Montevideo. The club name is a reference to the Danube river, the major waterway in Europe.
Danubio were the 2006/07 champions of Uruguay after defeating Peñarol 4–1 in December 2006 to claim the Apertura and again defeating Peñarol on penalties to claim the 2007 Clausura. Danubio previously won the Uruguayan title in both 1988 and 2004.
The club decided in 1932 to take Montevideo Wanderers' kit and colours (black and white) as homage to them being the last amateur champion of Uruguay in 1931. Later when entering a zonal league they planned to alter the kit design as Universal Ramírez used the same pattern. The current design was inspired by the right sash over the white kit worn by River Plate, but with the sash in black. This design remains today. The accompanying shorts are typically black (although some seasons they have been white), whilst the accompanying socks are white. In the 2005-06 season, the club wore an unusual green shirt with a white sash as their third kit to play against teams similar in colours (such as Miramar Misiones and Wanderers). In 2007, green was reintroduced in a match against Saprissa of Costa Rica. As of late 2007,it was decided to discontinue use of the green shirt, due to the repetitive defeats against Wanderers and Miramar leading to it being considered a cursed shirt. Red is now used for the third kit.
After the departure of Daniel Sánchez from Danubio, Daniel Martínez coached the team for 2 games (2–2 against Liverpool & 2–4 against Wanderers). After that, Juan Ramón Carrasco assumed as the new lead coach, and Martínez was offered the management and coordination of all youth teams. As an assistant coach came with Carrasco, one of the most iconic coaches in the history of the club, that is Ildo Maneiro of course. He was the first coach to win an Uruguayan League for Danubio. Alejandro Martínez came as the physical trainer. Carrasco's son, Juan Carlos Carrasco assumed as coach of the Third Division.