Yulee was born David Levy in Charlotte Amalie, St. Thomas, in what is now the United States Virgin Islands.

After studying and practicing law in St. Augustine, Levy was the delegate to United States Congress for the Florida Territory and was elected as a Democrat to the United States Senate when Florida was admitted to the Union in 1845, becoming the first Jewish senator (although never admitting publically that he was Jewish or of black descent until the end of his political career). In 1846, he officially changed his name to David Levy Yulee (adding the name of his maternal grandfather) and was married to Nannie C. Wickliffe, the daughter of Charles A. Wickliffe, former governor of Kentucky and Postmaster General under President John Tyler. After serving one term, Yulee was defeated for re-election in 1850.

After his defeat he began to follow his dream to build a railroad across Florida. He had originally planned to build a state owned system as far back as 1837, but in 1851 decided to build with federal and state land grants and public stock. the terminals would be the deep water ports, Fernandina on Amelia Island on the Atlantic side and Cedar Key on the Gulf. The Yulee Railroad was chartered in 1853. Construction began in 1855 and on March 1, 1861, the first train arrived in Cedar Key, just weeks before the beginning of the Civil War.

Elected to the Senate again in 1855, he served until January 21, 1861, when he withdrew from the Senate after Florida seceded to join the Confederacy. In 1865 he was imprisoned in Fort Pulaski due to his support for the Confederacy.

After the Civil War, Yulee held a number of executive positions in Florida railroads. He died in New York on October 10, 1886.

Both the town of Yulee and Levy County in the state of Florida are named for him.