Dam was born in Copenhagen and educated at the polytechnic and the university there, obtaining his doctorate in 1934. He taught at the university from 1923 until 1941, when – although stranded in America because of the war – he was appointed professor of biochemistry at the Copenhagen Polytechnic. From 1956 until 1963 Dam served as director of the Biochemical Division of the Danish Fat Research Institute.

From 1928 to 1930 Dam worked on the problem of cholesterol metabolism in chickens. Cholesterol, first analyzed by Heinrich Wieland, is a sterol with an important role in mammalian physiology. It was known that many mammals could readily synthesize it, but it was assumed that chickens lacked this ability. To test this assumption Dam began to rear chickens on a cholesterol-free diet enriched with vitamins A and D.

As it turned out he found that chickens could synthesize cholesterol but, more importantly, he also found that if kept on such a diet for two to three weeks the chickens developed hemorrhages under the skin, and blood removed for examination showed delayed coagulation. Supplementing the diet with fat, vitamin C, and cholesterol made no appreciable difference, so Dam concluded that the condition was due to lack of a hitherto unrecognized factor in the diet.

The missing factor, found to be present in green leaves and pig liver, was designated vitamin K by Dam in 1935 (K being the initial letter of ‘koagulation’, the Scandinavian and German form of the word). Using ether, Dam went on to extract the fat-soluble vitamin K from such sources as alfalfa, and in 1939 succeeded, with Paul Karrer, in isolating it. It was for this work that Dam shared the 1943 Nobel Prize for physiology or medicine with Edward Doisy (1893–1986), the American biochemist who had first synthesized vitamin K in 1940.