She was born as Phylis Daniels in Dallas, Texas. Her father was a theater manager and her mother a stage actress. The family moved to Los Angeles, California in her childhood.
Daniels first appeared on film at the age of 8. For a time she went by the name Virginia Daniels. She was hired by Hal Roach studio in 1915. Her early roles varied from stapstick comedy to "bathing beauty" appearances. She appeared in a number of comedies opposite Harold Lloyd. In the 1920s she was under contract with Paramount Pictures. Paramont dropped her contract with the advent of talking pictures, but Daniels made a hit in the 1929 soundie "Rio Rita", in which she sang as well. Her later notable Hollywood films included "42nd Street".
She retired from Hollywood in 1935.
With her husband Ben Lyon she moved to London in 1936. The couple did radio shows for the BBC. Most notably, they starred in the series "Hi Gang" which continued for decades, enjoying considerable popularity during World War II. The pair made the transition to television in the 1950s with the show "Life with the Lyons".
Bebe Daniels died of a stroke in London.