Daldry was born in Dorset, England, the son of bank manager Patrick Daldry and singer Cherry (née Thompson). The family moved to Taunton, Somerset, where when Daldry was aged 14, his father died of cancer. 
Daldry began his career at the Sheffield Crucible with Artistic Director Clare Venables where he directed many productions. He also headed many productions at the Manchester Library Theatre, Liverpool Playhouse, Stratford East, Oxford Stage, Brighton and the Edinburgh Fringe Festival. He was also Artistic Director of the Royal Court Theatre from 1992-8, where he headed the £26 million development scheme. He was also Artistic Director of the Gate Theatre, London (1989–92) and the Metro Theatre Company (1984-6). He is currently on the Board of the Young and Old Vic Theatres and remains an Associate Director of the Royal Court Theatre. He was the Cameron Mackintosh Visiting Professor of Contemporary Theatre for 2002 at St Catherine's College, Oxford. He won awards on Broadway as well as the West End.
Daldry was planning to direct a film adaptation of Michael Chabon's Pulitzer Prize-winning novel The Amazing Adventures of Kavalier & Clay in 2005. In the ensuing three years, the project was cancelled and reinitiated several times, and in late 2006 was partially cast with Natalie Portman and Tobey Maguire. According to Chabon, production then stalled due to "studio-politics kinds of reasons that I'm not privy to," and as of April 2007 remains inactive. The director will soon be working on the broadway musical version of Dumbo, with Disney Theatricals. The musical is to début on Broadway in 2012.
Although Daldry has been married since 2001 to American performance artist and magazine editor Lucy Sexton, with whom he has a daughter, Annabel Clare (born 2003), he describes himself simply as a gay man because people prefer it ("they don't like the confusion").
He was previously in a relationship with set designer Ian MacNeil for 13 years. They met at an outdoor production of Alice in Wonderland in Lancaster in 1988, and after settling in a bedsit in Camberwell, began collaborating on theatrical productions.