He was diagnosed with some kind of Neurological disorder that could kill him if he got stressed out, not sure what it was called.
He was doing work experience with some decorating firm, they were so impressed with his work they were going to offer him a job when he left school, Bronson was embittered by this and told them how unreliable he had been in the past, which cost him that chance. Danny confronted Bronson and really let him have it, even McClusky said Bronson was well out of order. Danny stole Bronson's car and went missing (even painted the outline of the car in his parking space, Bronson shouted "KEEEENNNNNDAAAALL!!!!!!" lol brilliant). Three episodes later Gonch, Robbieand Ziggy found the car with Danny in the back, he was dead. Sad, Kendall was a legend, didn't give a **** what anyone thought and stood up to anyone that had a problem with him.

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It was not suiside, this page will help
http://www.grangehillfans.co.uk/schoolreport/dannykendall.php

Thats what i heard to, i know he was found dead in the back of Mr Bronsons car, i remember that episode when it aired. But i wasnt sure what actually caused him to die, i pressumed it was suicide at the time, considering the last thing he said in the school before he flounced was "Dont worry, you wont be seeing me round here again".
Mr Bronson felt so much guilt over it though that it totally changed his character.

As I remember, Danny was found dead in Bronson's car. I think he had some sort or rare illness. I'll have to check the archives!!