Osheroff was educated at California College of Technology, Pasadena, and at Cornell, where he gained his PhD in 1973. After working at Bell Labs he moved to Stanford in 1987 as professor of physics.

In 1972, while still a Cornell graduate student of David Lee, Osheroff made a crucial observation that led to the discovery of the supposedly impossible superfluidity of helium-3. He was actually studying magnetism in helium-3 but, because the magnetic equipment was required elsewhere, Osheroff was detailed to test a new refrigeration device. He noted an unexpected blip in the cooling rate when the solid–liquid mixture fell to 2.6 millikelvins (2.6 millionth of a degree above absolute zero). He had in fact observed a phase transition. Further work revealed that the transition was from a normal fluid to a superfluid.

For his work on superfluidity Osheroff shared the 1996 Nobel Prize for physics with David Lee and Robert Richardson.