I would get counselling for yourself as a first step to help you put a plan in place, and if and when is the best time to tell your daughter. 

How old is she? It's best to tell her yourself before she finds out some other way. Let her know in an age-appropriate way that you got pregnant with someone else but he wasn't ready to be a father, then you met her dad and he was ready! Depending on her age be prepared for her to be upset and want to know more about him, as she gets older. Her age is an important factor. If she's young, it will just become part of her life story like it does with adopted kids. But I'd try to get bio father to give up rights and let your husband adopt her, if the narrative is that's he's going to be her dad forever. 

Who is on the birth certificate?

This is a tough situation.  Simply put, it shouldn't happen.  But... I know it does.

When my DW and I met SS was 15mos old.  He knew his Spermidiot though he and his mom were living more than 1200 miles away from SpermLand where my DW had gone to attend university.  At that time "Daddy"was a picture on the living room wall of BioDad.

As DW and I dated eventually SS started talking and decided I was "Daddy".  So, SS had two Daddies from a very young age.  As he grew up he gravitated to calling me Dad(dy) and the Spermidiot he called "Daddy (First Name)".  His mom and I married the week before SS turned 2yo.  We were finally to get the SpermClan to court to settle their attempt to take custody of SS from my DW once and for all 4 days after our wedding.  

When DW left SpermLand for college out of state they made absolutely no effort to speak with or visit SS.  Until the small town SpermLand grape vine reported that DW was dating someone. At that point SpermGrandHag filed a fraudulent attempt to gain custody.  She forged her idiot statutory rapist son's signature on a legal document going after custody. My DW caught that the Spermidiot's signature was wrong. That was her first response to their openning move to get custody.

For the next 8mos they would force DW to fly back to SpermLand for court dates that they would cancel at the last minute. This was their primary tactic to force DW to give up her kid by breaking her financially.  She called their bluff, took out supplemental school loans and engaged an attorney.

When we finally got them to court DW's full physical and legal custody of her son was confirmed and she won a slight increase in CS though none was requested, and the SpermClan ended up with less visitation than DW had offered in her final pre hearing rebuttal to their rediculous visitation demand of 26 weeks a year offer to drop the custody element of the case. They dropped it at the beginning of the hearing any way.

For 16+ years our family lived under SS's Costody/Visitation/Support order.  DW had full physical and legal custody. The Spermidiot had 7wks of visitation per year. 5wks summer, 1wk winter, 1wk spring.  

We did offer them the option of letting me adopt him.  They refused.  Ultimately SS-28 asked me to adopt him when he was 22.  We made that happen.

To this day I am Dad and the Spermidiot is something else. Over the decades he has evolved fom "Daddy (First Name)" to "Gangster Dad".  Gangster Dad and I are the topic of many stories in SS's office.  His colleagues know both of us well from SS's stories.

I would suggest that you introduce your kid to "BioDad" with a picture. As the kid grows explain what a StepDad is, what a BioDad is and what a REAL dad is.

For us that was a conversation we had when he was in his late toddler stage. 

"BioDad is the dad that made you with your mom." 

"StepDad is the dad that is married to your mom." 

"A REAL dad is the dad who works hard every day so you have a nice home ot live in, safe cars to ride in, good food to eat, good schools to go to, a save neighborhood to live in, teaches you to tie your shoes,  teaches you to ride your bike, teaches you to read and write, helps you to learn to use the toilet, coaches your sports teams, tucks you in to bed at nigh and reads  you bed time stories, and the dad who loves you and  your mom very much."

This worked well for us as we navigated the blended family adventure raising SS together from a toddler to a viable adult man of honor, character and standing in his profession and community.

Our son has a very limited relationship with his Spermidiot and the SpermCLan.  He clearly recognizes who his family is, who his father is and who in his blended family life he needs to be warry of.

I suggest that you go with the truth with your young child.  Start with the picture of her biological father, season her with the definitions of bio and step fathers, tell her the truth, then as he gets older start the discussion of what a REAL dad is.  A bio dad can certainly be a REAL dad, for most people that is the case.  So can a step dad.  For others it is an adoptive dad. It takes a quality person to be a REAL dad.

Your daughter is lucky to have your DH as her REAL father.  He is her Daddy. Hopefully he always will be her daddy.

You are better served in all of this to tell her the truth in an age appropriate manner.  That is far better than her finding out when she is a young adult or older. A good counselor for her may be in order.  This could help smooth the discussion.

IMHO of course.

As noted above, please consider finding a family therapist ---discuss these matter first with the therapist then tell you daughter.

Regardless of what her bio  dad did or didn't do, she should know the truth. 

JMO of course. Better to come from you than from someone else.