Kiš was influenced by Bruno Schulz, Vladimir Nabokov, Jorge Luis Borges, Ivo Andrić and Miroslav Krleža,[2] among other authors. His most famous works include A Tomb for Boris Davidovich and The Encyclopedia of the Dead.Kiš was born in Subotica, Danube Banovina, Kingdom of Yugoslavia (now Serbia). He was the son of Eduard Kiš (Hungarian: Kis Ede), a Hungarian-speaking Jewish railway inspector, and Milica (née Dragićević) from Cetinje (now Montenegro). His father was born in Austria-Hungary with the surname Kon, but changed it to Kis as part of Magyarization, a widely implemented practice at the time. During the Second World War, Danilo's father along with several other family members, were killed in various Nazi camps. His mother took him and his older sister Danica to Hungary for the duration of the war. After the end of the war, the family moved to Cetinje, Yugoslavia, where Kiš graduated from high school in 1954.

Kiš studied literature at the University of Belgrade, and graduated in 1958 as the first student to be awarded a degree in comparative literature. He was a prominent member of the Vidici magazine, where he worked until 1960. In 1962 he published his first two novels, Mansarda and Psalam 44. For his 1973 novel Peščanik (Hourglass), Kiš received the prestigious NIN Award, but returned it a few years later due to a political dispute. During the following years, he received an array of national and international awards for his prose and poetry.

Kiš lived in Belgrade until the last decade of his life, when he lived in Paris as well Belgrade. For a number of years he worked as a lecturer elsewhere in France. He was married to Mirjana Miočinović from 1962 to 1981. After their separation, he lived with Pascale Delpech until his early death from lung cancer in Paris.

A film based on Peščanik (Fövenyóra), directed by the Hungarian Szabolcs Tolnai, was finished in 2008. In May 1989, with his friend, director Aleksandar Mandić, Kiš made the four-episode TV series Goli Život about the lives of two Jewish women. The shooting took place in Israel. The program was broadcast after his death, in the spring of 1990. This was the last work by Kiš.

Kiš's work was translated into English only in piecemeal fashion, and many of his important books weren't available in English translations until the 2010s, when Dalkey Archive began releasing a selection of titles, including A Tomb for Boris Davidovich and Garden, Ashes; in 2012, Dalkey released The Attic, Psalm 44, and the posthumous collection of stories The Lute and the Scars, capably translated by John K. Cox. These publications completed the process of "the Englishing of Kiš's fiction", allowing the possibility of what Pete Mitchell of Booktrust called a resurrection of Kiš.Kiš was influenced especially by Jorge Luis Borges: he had been accused of plagiarizing Borges (and James Joyce) in A Tomb for Boris Davidovich, which prompted a "scathing response" in The Anatomy Lesson (1978),[8] and the influence of Borges is recognized in The Encyclopedia of the Dead. From Bruno Schulz, the Polish writer and prose stylist, Kiš picked up "mythic elements" for The Encyclopedia of the Dead, and he reportedly told John Updike that "Schulz is my God".

Branko Gorjup sees two distinct periods in Kiš's career as a novelist. The first, which includes Psalm 44, Garden, Ashes, and Early Sorrows, is marked by realism: Kiš creates characters whose psychology "reflect the external world of the writer's memories, dreams, and nightmares, or his experiences of the time and space in which he lives". The worlds he constructed in his narratives, while he distanced himself from pure mimesis, were still constructed to be believable. The separation from mimesis he sought to achieve by a kind of deception through language, a process intended to instill "'doubts' and 'trepidations' associated with a child's growing pains and early sorrows. The success of this 'deception' depended upon the effect of 'recognition' on the part of the reader". The point, for Kiš, was to make the reader accept "the illusion of a created reality".

In those early novels, Kiš still employed traditional narrators and his plots unfolded chronologically, but in later novels, beginning with Hourglass (the third volume of the "Family Cycle", after Garden, Ashes and Early Sorrows), his narrative techniques changed considerably and traditional plotlines were no longer followed. The role of the narrator was strongly reduced, and perspective and plot were fragmented: in Hourglass, which in Eduard Scham portrayed a father figure resembling the author's, "at least four different Schams with four separate personalities" were presented, each based on documentary evidence. This focus on the manipulation and selection of supposed documentary evidence is a hallmark of Kiš's later period, and underlies the method of A Tomb for Boris Davidovich, according to Branko Garjup:

First, most of the plots in the work are derived or borrowed from already-existing sources of varied literary significance, some easily recognizable—for example, those extracted from Roy Medvedev and Karl Steiner—while others are more obscure. Second, Kiš employs the technique of textual transposition, whereby entire sections or series of fragments, often in their unaltered state, are taken from other texts and freely integrated into the fabric of his work.

This documentary style places Kiš's later work in what he himself called a post-Borges period, but unlike Borges the documentation comes from "historically and politically relevant material", which in A Tomb for Boris Davidovich is used to denounce Stalinism. Unlike Borges, Kiš is not interested in metaphysics, but in "more ordinary phenomena"; in the title story of The Encyclopedia of the Dead, this means building an encyclopedia "containing the biography of every ordinary life lived since 1789".