Danae was born in Argos, the ancient city in the northeastern Peloponnese, the only child of King Acrisius and his queen Eurydice. Her father was a descendant of Danaus, the legendary king who had fled from Egypt with his fifty daughters, the Danaids, and established his line in Argos. Acrisius ruled wisely but without a male heir, and when Danae grew to womanhood, he became obsessed with the question of who would succeed him. He travelled to Delphi, the most famous oracle in the Greek world, where a priestess called the Pythia sat above a chasm and spoke prophecies inspired by the god Apollo. The oracle gave him a terrible answer: Acrisius would have no sons, and the son of Danae would one day kill him.

The king's response was to imprison his daughter. He commissioned a tower or chamber of bronze, or in some accounts of brass, with a single high window that let in light but nothing else. Danae was shut inside with her nurse, and Acrisius posted guards at every entrance. No man was permitted to see her, and no suitor was allowed to approach. The king believed that bronze could keep out both mortal men and the gods themselves, but he was wrong. Zeus, the king of the gods whose thunderbolt shook Mount Olympus, desired Danae and found a way to reach her. He transformed himself into a shower of golden rain that fell through the high window of the bronze chamber, pooling around Danae's feet and impregnating her with a child who carried divine blood in his veins. When Danae's nurse discovered her pregnant, she concealed the truth from the king for as long as she could, but eventually Acrisius learned that his daughter was with child.

Acrisius did not believe that a god was the father. He accused Danae of secret congress with some man who had bribed the guards, and when she insisted that Zeus had come to her as golden rain, he called her a liar. But he did not dare to kill her outright, for the killing of a kinswoman was among the most terrible crimes in Greek religion, and the Furies, the avenging spirits who punished murder within the family, would have hounded him to madness and death. Instead, he devised a punishment that would shift the guilt to the sea. He had a wooden chest built, large enough to hold a woman and an infant, and he placed Danae and her newborn son Perseus inside it. Then he cast the chest into the sea off the coast of Argos, trusting that the waves would drown mother and child and that the gods, not he, would bear the blame.

The chest did not sink. For days it drifted on the open sea, tossed by storms and baked by sun, until it washed ashore on the island of Seriphos in the Aegean Sea. A fisherman named Dictys, whose name means net, found the chest caught in his nets and opened it to discover Danae alive and clutching her infant son. Dictys took them to the house he shared with his brother Polydectes, the king of Seriphos, and there Danae raised Perseus in safety. But safety did not last. Polydectes desired Danae for himself and plotted to remove Perseus from the island by sending the young man on a suicidal quest to fetch the head of the Gorgon Medusa, the monster whose face turned all who looked upon it to stone. Perseus succeeded, returning with the severed head in a bag, and when Polydectes pressed his suit upon Danae with threats, Perseus drew forth the Gorgon's head and turned the king and his entire court to stone.

Danae's story did not end on Seriphos. Years later, when Perseus was a grown man and a famous hero, he travelled to Larissa in Thessaly to compete in the funeral games held for the father of the local king. Acrisius, Danae's father, was also present at the games, having fled Argos in fear of the oracle that foretold his death. During the discus throw, a gust of wind caught Perseus's disc and carried it into the crowd, where it struck Acrisius on the head and killed him instantly. The prophecy was fulfilled, but not by malice. Danae had outlived the father who tried to kill her, the king who tried to possess her, and the monster who threatened her son, and she returned to Argos with Perseus to found the dynasty that would one day produce Heracles himself.