Rabbi Yosef Shlomo Dayan was born in Aleppo, Syria, in 5684 (1924), to Rabbi Nissim and Jamila Dayan. His father came from a distinguished rabbinic family, served among the community's dayanim and taught students. He was educated by his father and in the kuttab, the community talmud torah.

In 5694 (1934), at about ten years of age, he immigrated to the Land of Israel with his family, who settled in the Rechavia neighborhood of Jerusalem. After his father's death in 5702 (1942) he worked as a delivery driver; following an arrest by the British authorities he left that work and devoted his life to the study of Kabbalah and the observance of mitzvot. He studied one-on-one with Rabbi Mordechai Sharabi and was also a student of Rabbi Chaim Sinwani.

He concealed his Kabbalah study from the public, lived modestly and wore simple clothes far from rabbinic dress. For long periods he secluded himself at the graves of Tannaim and Amoraim in the Galilee and elsewhere, reciting prayers and tikkunim. He went daily to the tomb of the prophet Shmuel with groups of avrechim he organized, and also frequented the Western Wall, the tomb of Shimon HaTzaddik and the Mount of Olives. The locating of several graves of tzaddikim in northern Israel is attributed to him, and every summer he painted and whitewashed their tombstones. He gave charity in secret, and his students regarded him as a wonder-worker.

In 1984, with the approval of the gabbaim, he had a new Holy Ark built at his own expense for the Nezer Aharon synagogue in Bayit VeGan, having saved for it for about a decade.

He passed away on Friday, 9 Tammuz 5745 (28 June 1985) in Jerusalem, two weeks after a first heart attack. His students held a hasty funeral before Shabbat, and he was buried in the Har HaMenuchot cemetery.