Before the start of the race, several cars had to move to the rear of the field: engine changes for polesitter Greg Biffle, Ryan Newman, Ricky Craven, and 1990 race winner Derrike Cope. Rookie and Sprint Cup debutant Scott Riggs started from the rear in a backup car. This meant that Gatorade Duel #1 winner Dale Earnhardt, Jr. took over the first starting spot and led the opening laps.
Mark Martin, coming off a disappointing season last year, exited the race with a blown engine on lap 8, which brought out the first caution. On lap 26, his Roush Racing teammate Jeff Burton joined him in the garage, likewise with an engine failure. Kevin Harvick made the first lead change on lap 30. Four laps later, Cope spun in turn 4, collecting Scott Riggs; this would bring out the second caution. After the first round of green flag pit stops, Tony Stewart took the lead. He and Jimmie Johnson swapped it a few times while navigating lapped cars (most of them were at the "tail-end" of the lead lap, given that the lap 34 crash occurred during pit stops) before Earnhardt, Jr. reclaimed the lead.
On lap 60, the third caution was flown when Rusty Wallace, Ken Schrader, and Jeff Green crashed on the backstretch. After the restart, Stewart and Earnhardt, Jr. both battled for the lead until a huge crash occurred in the backstraightaway on lap 71. This started when rookies Brian Vickers and Johnny Sauter made contact, collecting Marlin, Newman, defending 500 winner Michael Waltrip, John Andretti, Kevin Lepage, Terry Labonte; Johnny Benson, Jr.; Scott Riggs, Robby Gordon, and Jamie McMurray. Waltrip got the worst of it, as his car went into the infield grass. The friction, combined with the fact that the rains that had washed out the Busch race the day before, caused the tire rim to dig into the infield grass. The car flipped over three times, kicked up a lot of dirt, and came to a spot on its roof. A temporary delay under a long caution (although the race was not red-flagged) ensued as emergency crews debated whether or not to upright Waltrip's car before extricating him. The situation was exacerbated due to Waltrip's size.
Jeff Gordon led the field at the lap 81 restart. From laps 81 to 200 were run caution free. The main competitors during the second half of the race still were Stewart and Earnhardt, Jr., who combined led 101 of the final 120 laps. They were the two strongest cars of the day, as they lead for more than 156 laps (98 by Stewart and 56 by Earnhardt, Jr.).
Driver Rusty Wallace wrecked Kevin Harvick on the halfway lap at Daytona, spinning him in front of the entire field. Amazingly, everyone avoided Harvick's out of control car. Harvick drove his car to the garage; no caution came out. Dale then went over to Rusty's pit stall to wait for him, and got into a fistfight with Rusty. "He wrecked my driver in a dangerous manner, I thought after Adam, Tony, and John, he would have some sense. I guess I was wrong". Rusty had no comment. Dale was later fined $100,000 and put on probation until December 31st, 2004.
When the leaders pitted at lap 137, Sauter (who was five laps down after damage to his car from the lap 71 crash) tried to pit with them but had evident braking issues. He had to swerve to miss Kurt Busch (who was one lap down after contact with Earnhardt, Jr. earlier in the race punctured a tire) and flew through the pitlane at over 100 mph. Wisely, he did not attempt to stop in his pit box and came around the track to try again. His speeding penalty dropped him further back. During the final round of green flag pit stops with approximately 30 laps to go, Biffle tried to gain ground on the leaders at the pit entry, but was quite evidently faster than the pack of cars running at pit lane speed. He dropped behind them prior to pitting, but his speeding penalty dropped him out of the Top 10 and from contention for the win.
When the final green flag pit stops were over, rookie Scott Wimmer of Bill Davis Racing was out in front. The crew had only changed right-side tires, elevating him from a likely seventh or eight-place finish to a chance to win. Unfortunately, he had no drafting partner and was caught up by the faster Stewart and Earnhardt, Jr. with 25 laps to go. Earnhardt, Jr. passed Stewart on lap 181 and held him off in the remaining laps to win his first Daytona 500. Earnhardt, Jr. won the race exactly three years after Waltrip had won his first race which itself came three years after Earnhardt's win in the 1998 race. Dale Sr. was, naturally, the first to visit his son at victory lane. Dale's now famous line, "That's my boy. Hell of a win." was televised live.