A native of Minnesota, Dayton is the great-grandson of businessman George Dayton, the founder of Dayton's, a department store that later became the Target Corporation. He embarked on a career in teaching and social work in New York City and Boston after graduating from Yale University in 1969. During the 1970s, he served as a legislative aide to U.S. Senator Walter Mondale and Minnesota Governor Rudy Perpich. In 1978, Dayton was appointed the Minnesota Economic Development Commissioner and married Alida Rockefeller Messinger, a member of the Rockefeller family.