Fahey was born in Clonmel, County Tipperary in 1928. He was educated locally at the Christian Brothers School. Following his education he worked as a farmer, an auctioneer and an insurance broker. Fahey first entered politics in 1950 when he was elected to Waterford County Council. He held his seat on that authority until 1970, and later from 1974 to 1999.
He was first elected to Dáil Éireann as a Fianna Fáil Teachta Dála (TD) for the Tipperary South constituency at the 1965 general election. It was his second attempt to get elected, having earlier contested the 1961 general election. From the 1977 general election onwards, he was elected for the Waterford constituency.
Like many other TDs, Fahey began to grow disillusioned with the leadership of Jack Lynch by the late 1970s. He and others were particularly concerned that George Colley would succeed Lynch as leader of Fianna Fáil and Taoiseach. Fahey was instrumental in forming the so-called "gang of five" with Albert Reynolds, Mark Killilea, Tom McEllistrim and Seán Doherty. This group began to lobby the Fianna Fáil parliamentary party on behalf of Charles Haughey, whom they regarded as a better choice for leader than Colley.
Haughey was the eventual winner of the leadership contest and rewarded Fahey by appointing him Minister of State at the Department of Environment, a post he held from 1979 to 1981. He was not re-appointed in any future Haughey government but remained a Haughey loyalist. Fahey contested the 1989 European Parliament election for the Munster constituency but was not elected. He was annoyed at his running mate in the constituency, and subsequently voted against the proposed Fianna Fáil–Progressive Democrats coalition; this action lost him the party whip. He re-applied for membership of the party in 1990 and was re-admitted.
Fahey lost his seat at the 1992 general election. He served out his council term on Waterford City Council, and retired from politics in 1999.