Danzo was Hiruzen's rival for position of Third Hokage, but lost. He is very militaristic and logical, believing that emotion is destructive. He's also one of Konoha's council of elders that advise the Hokage. He created a sub-division of the Anbu called "Root" where he took orphans and turned them into emotionless machines capable of acting out any order. He created this to do what the dove-like Hiruzen could not so to protect Konoha. It was eventually discovered and shut down by Hiruzen, however Danzo kept it active in secret.
During the Second Great Ninja War, the war between Konohagakure and other ninja villages converged in Amegakure, where the leader was Hanzo. Danzo and Hanzo struck a deal, Hanzo would help Danzo become Hokage and Danzo would help solidify Hanzo's leadership of Amegakure. But in order to do this, they first had to get rid of a rebel band of ninjas. This didn't go as planned.
After the Kyuubi attacked Konoha, the Uchiha clan were held responsible and subjugated leading to threats of rebellion from the Uchiha clan leader, Fugaku. Hiruzen and Fugaku negotiated but couldn't come to an agreement. Danzo and the other elders feared a rebellion, thinking it would weaken Konoha and lead to another war, so they went against Hiruzen's wishes and had Itachi Uchiha exterminate the Uchiha clan. Itachi however could not bring himself to kill Sasuke, his younger brother, and begged Hiruzen to watch over him, and at the same time threatened Danzo; saying that if anything happened to Sasuke, he'd reveal Konoha's secrets to other villages.
Upon Naruto's return after his three years of training with Jiraiya, Tsunade argued with the council of elders over whether or not to allow Naruto to seek out Sasuke while Akatsuki was after him. Tsunade won the argument, however there was still the problem of Sasuke's replacement on Team 7 at which point Danzo suggested Sai, whom is the most exceptional ninja of his age group. So Sai joined Naruto, Sakura, and Yamato to retrieve Sasuke. However, Sai is a part of Danzo's Root and was ordered to assassinate Sasuke by pretending to ally with Orochimaru; but Sai ultimately decided not to go through with his order. Sai would later ask Danzo if he could remain in Team 7 and Danzo gave him permission, but warned him that emotions are dangerous.
When Pein invaded the village, Tsunade ordered to get Naruto back from Mount Myoboku, but Danzo secretly attempted to stop this from happening so Pein couldn't get Naruto. He and his Root then hid, waiting out the attack in order to pick up the pieces and take control of the village afterwards. Naruto did end up returning and defeated Pein, but Tsunade went into a coma trying to protect the villagers and heal them. During a meeting with the Fire country's feudal lord, it was decided that Konoha needed a leader and Kakashi Hatake was nominated, however Danzo had argued that Hiruzen and everyone connected to him, including Kakashi, are the ones responsible for Konoha's situation because they were too soft and idealistic; the feudal lord then designated Danzo to be the Sixth Hokage.
Danzo was given a request by Kumogakure ninja to attend a meeting of Kages to address what to do about Akatsuki, and he declared Sasuke a rogue ninja and gave permission to kill him. He then prepared for his departure and assigned Sai to watch Naruto and make sure he doesn't leave the village, but he doesn't entirely trust Sai and assigns Anbu to keep watch as well. He also has Root watching Anko, and has sent Terai to find Kabuto Yakushi whom has information of Orochimaru's experiments that Danzo wants in order to heal himself. He's also only being able to bring two body guards, so he chose the two most skilled Root ninjas: Fu and Torune. As they started to travel, they were attacked by assassins from the Land of Wood wanting revenge, but Danzo mercilessly killed them all himself.
While at the Kage summit, held in the neutral yet powerful Land of Iron which has samurai instead of Ninjas; and the moderator of the summit was the leader of the Land of Iron, Mifune. During the meeting, Danzo presented the fact that the thought-dead Madara might be the leader of Akatsuki, and Mifune suggested that the five Kages join together to stop Akatsuki with Danzo as the leader. This would help in order to coordinate efforts instead of bickering over command; addressing that Akatsuki had been a mercenary force being used frequently by the Tsuchikage, that Akatsuki likely originated in Kirigakure and that there could be double agents, that the Raikage has been secretly building up his forces even though everyone has been trying to avoid war, and the fact that Gaara is still too young and inexperienced.
One of the Mizukage's bodyguards, Ao, noticed an irregularity with Danzo's chakra using the Byakugan that he took from a Hyuuga. He then realized that Danzo not only had the Sharingan in his right eye, but that it belonged to Shisui Uchiha, whom was able to use it to give hypnotic suggestions to people, and believed that he was manipulating Mifune. The summit was about to become an uproar until Zetsu appeared, warning them that Sasuke is there. Raikage, Gaara, and their bodyguards left to confront Sasuke while the others remained behind, Ao made it his responsibility to watch Danzo and make sure he doesn't try any other tricks. When Sasuke managed to enter the room Mifune attacked Sasuke and in the confusion Danzo and his bodyguards escaped, but Ao chased after.
Danzo and his bodyguards were aware that Ao was tailing them and Fu set a trap. Fu switched his mind into a puppet and when Ao passed by Fu attacked and traded bodies with Ao, trapping him in the puppet while Fu tried to remove his Byakugan, but the seals Ao wore as earrings prevented this. Fu decided to chop off Ao's head and then come back for it later, but was stopped by the Mizukage. Fu pretended to be Ao and thanked her for saving him, saying that one of Danzo's bodyguards are from the Yamanaka clan and that he couldn't control his body. Mizukage asked if he wanted her to undo the seals on the Byakugan and he accepted, but this was a trick and she realized that Fu was still in control of Ao's body so he went back to his own body before she could hit him with Chojiro's sword.
Tobi caught up with Danzo and his bodyguards, saying that he hadn't seen Danzo since the Uchiha Massacre. Danzo's bodyguards attacked Tobi, forcing him back. Danzo then told them to cover him. While they attacked, Danzo started undoing the brace and bandages on his right arm. Torune threw kunai which Tobi dodged, but it was just a distraction while Fu tried to use Mind-Body Switch, but Tbi phased through the ground to avoid it. He reappeared behind Fu, and Fu tried to attack with his tanto but Tobi grabbed his hand and was about to punch Fu, but Torune threw a kunai at Tobi which forced him to phase, allowing Fu to escape. They realized that he can't attack while he's phasing, so Torune took off his gloves and the duo attacked in unison.
Fu went through Tobi and he spun around to punch him while Torune came at him from behind, but it was a trick, Tobi just acted like he was going to attack and Torune went through him and accidentally hit Fu. Tobi realized that he was from the Aburame clan, and that Torune's punch infected Fu's arm with his poisonous insects, but Torune healed Fu. Torune then took off his jacket and attacked Tobi, but he teleported him away, however Tobi's arm was infected in the process and he removed his arm and kicked it at Fu. As Fu evaded it, Tobi teleported him away too. He then retrieved Sasuke and Karin, telling him that he has a gift for Sasuke, and brings Sasuke out to fight Danzo.
Danzo however has finished releasing his arm, revealing it to be covered in multiple Sharingan, and says that he'll take Sasuke's and Tobi's too. The sight enraged Sasuke even more, Danzo did some handseals and charged at Sasuke but Sasuke protected himself with Susanoo which grabbed Danzo. Sasuke and Danzo talked for a moment and Susanoo crushed Danzo, but Danzo appeared behind Sasuke and tried to stab him, but Susanoo protected him and crushed Danzo. Danzo however appeared elsewhere, still alive. Susanoo attacked again but Danzo dodged, Sasuke jumped at Danzo and used "Amaterasu" and Danzo fell covered in black flame.
But Danzo appeared behind Sasuke and used "Vacuum Jewel", which Sasuke was barely able to dodge and got hit in the shoulder. Karin noticed that each time Danzo escapes death that one of the eyes on his arm closes. Sasuke summoned a hawk and charged at Danzo, Danzo used "Vacuum Wave" forcing Sasuke to jump off of his summon to attack; Danzo grabbed Sasuke by the throat, but Sasuke used his sword to kill Danzo. Danzo reappeared unharmed, at which point Sasuke turned into crows and reformed near Danzo as Itachi.
Itachi used "Amaterasu", but it was actually Sasuke's Tsukiyomi and Danzo broke it and paralyzed Sasuke before he could stab him. Danzo placed his paralyzing seal on Sasuke when he grabbed his neck. Karin tried to help Sasuke, but Danzo kicked her away and was about to kill Sasuke when he used his Susanoo to save himself, knocking Danzo away. Sasuke was able to overpower Danzo's seal and was about to use Susanoo's bow & arrow to kill Danzo, but he was able to create a tree to save himself. Susanoo shot another arrow, but Danzo was able to use his jutsu, "Izanagi", to resurrect himself again.
It's explained that "Izanagi" blurs reality and illusion, and that for 60 seconds, Danzo is invincible because any injury or death caused will be changed into an illusion; but after which the Sharingan eye can no longer be used. Susanoo shoots another arrow at Danzo but he revives himself and uses "Great Vacuum Jewel", but Susanoo blocks it with it's shield/bow. Danzo summons a Baku and it begins to try to suck in Susanoo, Susanoo braces itself though.
Danzo appears from behind and blasts Susanoo's back with "Vacuum Serial Waves" which creates an opening in Susanoo's back and Danzo goes to attack Sasuke, but he shoots a "Grand Fireball" at the Baku which makes it gag and Susanoo punches Danzo away. Sasuke's no longer able to sustain Susanoo and it disappears, the two then grab their weapons and attack: Sasuke charges his sword with lightning and Danzo creates a sword of wind, and they both stab each other through the chest.
Danzo had planned on sacrificing the last Sharingan on his arm in order to kill Sasuke, however his last eye had already ran out of time and Sasuke used a genjutsu to trick Danzo into thinking it was still open. Sasuke however was just fatally wounded as Danzo and Karin rushed to heal him, while this was going on Hashirama's D.N.A. was starting to overwhelm Danzo and his right arm grew into a tree. Danzo was able to break himself away before it grew around him; Shisui's Sharingan however was working again and Danzo took off his bandages.
Sasuke attacked with "Chidori", but Danzo dodged it and grabbed Karin to use her as a shield. Danzo was trying to figure out if he should sacrifice Shisui's Sharingan for Izanagi or use it's mind control in a last-ditch effort to kill Sasuke. Sasuke told Karin not to move and used "Chidori Spear", impaling Danzo and Karin. Danzo let Karin's body fall and started to walk away, with Sasuke following him, but Tobi jumped in front of Danzo and said he'll be taking Shisui's eye.
Danzo started to have a memory of himself, his team, and Hiruzen's team led by Tobirama. Tobirama deduced that they were being tracked and were heavily outnumbered by the Cloud village's Kinkaku Force. It was suggested that someone should serve as a distraction and Danzo wanted to do it, but somehow couldn't make himself volunteer. Hiruzen volunteered which upset Danzo and he insisted that he goes instead, however Tobirama interrupted them and said that the two have to put their rivalry aside during missions and that he'll go.
Danzo refused, saying that he's the Hokage, but Tobirama said that Hiruzen will be the new Hokage. Back to the present, Danzo decided to sacrifice himself to stop Madara and Sasuke instead of trying to survive; he activated the "Reverse Four Symbols Seal", however Tobi and Sasuke were able to get to safety.
Aside from basic ninja arts, Danzo has displayed the ability to use wind jutsus, which is a rare ability. He has used "Vacuum Jewel" which releases many small balls of wind which pierce like bullets; "Vacuum Wave" which is a single long blade-like stream of wind; "Great Vacuum Jewel" which shoots a large ball of wind; "Serial Vacuum Wave" which releases large continuous slicing blades of wind; and has created a sword out of wind. He has also shown to be able to propel himself for short distances by blowing.
Danzo has the ability to summon a gigantic Baku, a mythical chimeric creature that devours dreams and nightmares, which displayed the ability to suck things into it's jowls. Danzo also used Baku's sucking ability to increase the power of his wind jutsu.
He has also placed a "Binding Curse Seal" on all of his Root ninjas, making it so they cannot reveal information about Root or Danzo without being paralyzed; he can also place this seal on opponents and activate it at will.
He has the "Reverse Four Symbols Seal" which activates upon his death, it sucks in everything around him and seals it inside his body.
His right eye and right arm belonged to Shisui Uchiha. Aside from being able to use the Sharingan's abilities, he's also capable of using Shisui's unique Mangekyo Sharingan genjutsu called "Koto Amatsukami" which allows him to control people by placing thoughts into his opponent's mind which they believe are their own. Also Danzo does not need to make eye contact for it to take effect unlike most other Sharingan-type genjutsus which usually need eye contact. The downside is that after it's use, he's not able to use it again for a couple hours.
However even more macabre is that Danzo's right arm is covered in ten Sharingan which he uses for an ability called "Izanagi." Although it was imperfected, it made him become a physical illusion, making him virtually invincible for a minute per eye; after which the eye can no longer be used. It had the added power to teleport him after each of his "deaths."
On top of that, he also possesses Hashirama's D.N.A. in his right arm, this augments his chakra and allows him to use Mokuton. However, he had limited control of Hashirama's powers.