In the book "Fire and Blood," rumours abound for many years about the exact nature of the relationship between Daemon and his niece Rhaenyra. Some believe that he was Rhaenyra's first lover, while others suggest that he simply taught her the art of seduction so she could pursue Ser Criston Cole.
"House of the Dragon" offers the "real" story behind it all, which combines a little bit of both major rumours. Daemon takes Rhaenyra to a brothel and kisses her, but stops the encounter before they actually have sex. A frustrated Rhaenyra then returns home and sleeps with Criston, and when rumours about her and Daemon spread, Daemon offers to marry her but is instead banished by Viserys.
In any case, their relationship goes on the back burner for many years, as both marry other people and have children with them. After the death of Laena, as well as Rhaenyra's husband Laenor, Rhaenyra and Daemon quickly begin a relationship and marry just six months later. Once again, the marriage causes a scandal since it is performed without King Viserys's knowledge and approval. The couple have two sons, Aegon and Viserys, and Daemon becomes Rhaenyra's supporter during the Dance of the Dragons.
Although neither Daemon nor Rhaenyra survive the civil war, their legacy lives on in their descendants, who remain on the throne until the end of the Targaryen dynasty centuries later.