Dohnányi studied in Budapest at the Royal Academy of Music, where his first symphony was performed in 1897. As a pianist he traveled widely and established a reputation as one of the best performers of his day.

He taught at the Berlin Academy for Music (1908–15) and was conductor of the Budapest Philharmonic and associate director of the Budapest Academy of Music (1919). In 1931 Dohnányi was musical director of Hungarian radio. In 1948 he left Hungary as a political exile; his influence under the prewar regime was held against him, and his music was banned in communist Hungary for more than 10 years. He taught in Argentina and from 1949 held the position of composer-in-residence at Florida State University. He became a U.S. citizen in 1955.

Dohnányi's music, which was chiefly influenced by Johannes Brahms (Brahms, Johannes), was late Romantic and conservative in style, and after 1910 he occupied only a minor place among contemporary Hungarian composers. His works include the Ruralia Hungarica for violin, three symphonies, a ballet, the Suite in F-sharp Minor, three operas, and chamber works, notably the Second String Quartet and the two piano and string quintets.