Tarkanian was born in Redlands, California, the third of four children. He is the son of Jerry Tarkanian, a former prominent UNLV basketball coach, and Lois Tarkanian (née Huter), a Las Vegas City Councilwoman, educator of children with disabilities, administrator, and a co-founder for California's first private school for the deaf.
When Tarkanian was teenager, he moved into three different California cities (Riverside, Pasadena, Huntington Beach) as his father progressed in his professional career.
The Tarkanian family moved to Nevada in 1973 while Danny was 12. He attended Hyde Park Junior High School (Las Vegas, Nevada) and later the Bishop Gorman High School. He achieved honors in all four years. After graduating from high school, he spent one year at Dixie College, before becoming a student-athlete at UNLV where he was coached by his own father.
At Bishop Gorman High School, he played both basketball and football, and both sports teams went into the playoffs and won state championships. In basketball, he played point guard. In football, he played QB and was named All-Conference and All-State at his position twice. He was also named the Nevada’s Most Valuable Player.
He played basketball one season at Dixie State, where his team to the regional playoffs. He was named the school’s Male Freshman of the Year.
Tarkanian played 3 seasons, 1981–1984, for the UNLV Runnin' Rebels basketball. He was the starting point guard and captain. In his sophomore year, his team won 24 straight games and was ranked Number One nationally.
He was drafted by the San Antonio Spurs in the 1984 NBA Draft in Round 8.
At UNLV, Tarkanian was twice named First-Team Academic All-American by the CoSIDA. He was the school’s first Rhodes Scholar candidate and received the NCAA post-graduate award.
Following graduation, Tarkanian received his J.D. from the University of San Diego School of Law, where he finished third in his class.
Tarkanian passed the Nevada Bar Exam and practiced law for eight years, four as proprietor of his own firm.
In 1995, Jerry Tarkanian became the head coach for the Fresno State Bulldogs basketball team at Fresno State, where Danny joined his father as an assistant coach. The team qualified for the post-season every year during Tarkanian's tenure.
Tarkanian moved back to Las Vegas following his father’s retirement in 2002. He started a real estate investment business and he co-founded the Tarkanian Basketball Academy.