She was elected as a Socialist Party Teachta Dála (TD) for the Dublin North constituency at the 2011 general election. She was previously a Socialist Party councillor for the Swords electoral area on Fingal County Council. She resigned from the Socialist Party on 31 August 2012, redesignating herself as a United Left Alliance TD.
Daly is from Newbridge, County Kildare. Her father, Kevin Daly, was a Colonel in the Irish Army and Director of Signals. She is a long-standing atheist, though her brother and an uncle are in the Catholic priesthood. Daly studied accountancy at Dublin City University. She was twice elected president of the Students' Union and was prominent in the students' movement campaign for abortion rights and information. On leaving college she took a job in the catering section of Aer Lingus on a low wage, and became SIPTU's shop steward at Dublin Airport when the airline was engaged in extensive cost-cutting and outsourcing. Daly was elected to the Labour Party's Administrative Committee as a youth representative. She was expelled from the Labour Party in 1989 alongside Joe Higgins and other supporters of the Militant Tendency.
On 19 September 2003, Daly was jailed for a month, alongside 21 others from the Anti-Bin Tax Campaign for breaching a High Court order preventing protests leading to obstruction of the council's non-collection policy for those not paying bin charges. She was also an organiser of the Anti-Water charges campaign in Swords in the mid-1990s.
Daly was elected as a Councillor on Fingal County Council for the Swords area in the 1999 local elections. She was re-elected at the 2004 local elections and the 2009 local elections, topping the poll on each occasion.
She first tried for a seat in Dáil Éireann at the 1997 general election, receiving 7.2% on that occasion and 8.2% at the by-election later in the year. At the 2002 general election she received 5,501 votes (12.5%), narrowly missing a seat. At the 2007 general election she received 9% of the vote.
Daly was elected to Dáil Éireann at the 2011 general election, taking 15.2% of the first preference vote. She committed to facilitating the nomination of Senator David Norris for a place on the ballot paper ahead of the 2011 presidential election.
She announced that she would not register to pay a new household charge brought in as part of the latest austerity budget, calling it "reprehensible", and telling Phil Hogan, the minister responsible, in the Dáil: "You can't bring everyone to court".
In February 2012, it was reported that she would introduce a bill to provide for limited access to abortion where there is “real and substantial risk to the life” of the pregnant woman, in line with the X Case. The bill was defeated before its second reading on 19 April 2012.
In June 2012, Daly refused to call for the resignation of her friend and political ally, Mick Wallace in the wake of his VAT controversy. It was reported that the ULA were to confront her over this stance.
In July 2012, it was revealed she had used travel expenses for travelling to anti-household charge meetings.
She resigned from the Socialist Party on 31 August 2012. In a statement, the Socialist Party said "it believed Ms Daly had resigned because she placed more value on her political connection with Independent TD Mick Wallace than on the political positions and work of the Socialist Party." This claim was dismissed by Daly as "absolute nonsense", who stated that she had not called for Wallace's resignation because the Socialist Party had not called for his resignation. She requested a share of the €120,000 Socialist Party's Leaders Allowance to allow her to continue to fund her activities as an Independent TD.
In April 2013, along with Joan Collins, she founded a new political party called United Left.
Following the 39th G8 summit, Daly accused the Fine Gael-Labour government of “prostituting” the country to US president Barack Obama and criticised what she described as media and political "slobbering" over his wife Michelle and their children during their stay in Ireland. She also called Obama a hypocrite and a war criminal for speaking about peace whilst using drones to bomb foreign civilians and wanting to supply weapons to Syrian rebels, some of which are affiliated with Islamist organisations, including Al-Qaeda. Taoiseach Enda Kenny responded to her comments, saying they were "disgraceful" and "beneath you" and invoked the diaspora and to the victims of The Troubles since President Obama has supported peace in Northern Ireland. Daly's remarks were covered by the international media and Daly gave interviews explaining them.
In May 2015, Daly's passion compared to that of others such as Micheál Martin and Gerry Adams during her questioning of Taoiseach Enda Kenny over the sale of Aer Lingus was remarked upon by media.
In December 2015, Clare Daly along with independent TDs Mick Wallace and Maureen O'Sullivan each put forward offers of a €5,000 surety for a 23-year-old man being prosecuted under terrorism legislation in the Special Criminal Court in Dublin charged with membership of an illegal dissident republican terrorist organisation.
At the 2016 general election, she stood as an Independents 4 Change candidate in the Dublin Fingal constituency, and was elected.