He lived in Indiana, Ohio, and at the age of 9 he moved to Washington, D.C., where he studied at the Corcoran School of Art. Later, he went to London and studied under Frank Brangwyn. During World War I, he was commissioned to produce propaganda posters for various US Government agencies, including the United States Shipping Board.
Daugherty wrote and illustrated several children's books during his career. In his book Daniel Boone won the Newbery Medal. His book with Benjamin Elkin, Gillespie and the Guards, won the Caldecott Honor in 1957. He was also the author of Walt Whitman's America Selections and Drawings by James Daugherty.
In September 2006, controversy erupted at Hamilton Avenue School, an elementary school in Greenwich, Connecticut, over Daugherty's depiction of Bunker Hill hero and Connecticut native Israel Putnam in a mural commissioned by Public Works of Art Project for the town hall, and installed in the school in 1935. The mural was restored, and revealed a scene, filled with violent and richly-colored imagery, including snarling animals, tomahawk-wielding American Indians, and a half-naked General Putnam strapped to a burning stake. School officials objected to the violent imagery, and ordered the mural removed to the Greenwich Public Library. 
Daugherty will be included in the exhibition The Société Anonyme: Modernism for America at the Yale Gallery in 2010.
- "James Daugherty, Artist, Dead; Children's Book Author Was 84", The New York Times, February 22, 1974.
- "James Henry Daugherty Papers", Elmer L. Andersen Library, University of Minnesota
- Newbery Medal Books: 1922–1955, eds. Bertha Mahony Miller, Elinor Whitney Field, Horn Book, 1955, LOC 55-13968, pp. 1176–84.
- "Translated Newbery titles | Association for Library Service to Children (ALSC)". Ala.org. Retrieved 2013-05-08.
- "Caldecott Medal & Honor Books, 1938-Present | Association for Library Service to Children (ALSC)". Ala.org. Retrieved 2013-05-08.
- "Painting Called Too Violent for Children Won’t Return", The New York Times, MATTHEW J. MALONE, September 29, 2006.
- Biographical Sketch. University of Minnesota. Retrieved July 7, 2006.
- Newbery Medal and Honor Books, 1922–Present. American Library Association. Retrieved July 7, 2006.
- The Société Anonyme: Modernism for America, Yale Gallery
- Heroic America: James Daugherty's Mural Drawings from the 1930s
- WPA Mural Studies
- "The Mural in the Gym", Collecting Children's Books, November 3, 2009