For two years now, the name James Murphy has been one of the most fiercely hip in all New York. A DJ and label-owner, he is also one half of the production team DFA (alongside British expat Tim Goldsworthy, formerly of trip-hop act Unkle), whose work on records by Radio 4 and the Rapture made Murphy the pivotal figure in New York's corrosive dance-rock scene, and made the city the centre of rhythmic guitar noise for the first time in 20 years.

Meanwhile, Murphy's own releases as LCD Soundsystem - notably Losing My Edge, an eight-minute, laugh-out-loud funny dissection of cool over a dirty electronic beat - brought him international acclaim.

Yet when the NME voted him 26th in its annual Cool List, one place above his hero Dr Dre, Murphy just found this preposterous. "Things like that make me want to go home and never come out again," he says. Sitting cross-legged on the first floor of his studio complex in Greenwich Village, his red and blue Adidas trainers tucked neatly under his scuffed brown corduroys, the 34-year-old doesn't exactly radiate confidence. In fact, as far as Murphy himself is concerned, "I'm basically a schlub."

Partly, this assessment of himself stems from something that happened when he was 21. A sharp, dry young graduate, who majored in English, Murphy was in talks with the producers of It's Garry Shandling's Show. They told him they were looking for writers for a new sitcom and sent him some scripts but, intent on pursuing a career in music, he failed to respond. He even ignored their offer to be the first staff writer on the show. Its name? Seinfeld. He still has the letter pinned to the wall of his office, a constant reminder of what he refers to as "the biggest mistake of my life". He's not proud of it. "Failure is not a positive," he tells me. "And I speak as a fucking lifetime failure."

There are plenty of people in the music world, however, who would be grateful for Murphy's mistake. One band who sought him out recently, hoping for some DFA cred by association, was Duran Duran. He was too busy to work with them, although he concedes that "it might have been fun".

Then there was Janet Jackson, who called him directly at the studio herself. "It was the strangest moment imaginable," he says. "I answered the phone and it was her, calling me at my desk." Murphy, who from a young age found he could mimic virtually any rock singer in the firmament, from Robert Smith to Ian Curtis, does his best Janet Jackson impression, all helium squeak and infantile inflections. "She just said, 'I want to do something that's raw and funky like Losing My Edge, really raw and funky.' So I said, 'When?' She said, 'Well, call Dan.' I never called Dan."

Murphy may not have called Dan - partly because he didn't know who Dan was - but he did get involved with Britney Spears, who also called him wanting to enlist his services. "It was a really dark time," he says. The Rapture had just signed with a major label, leaving him and Goldsworthy bereft and depressed. "We felt like parents whose kids have gone to college."

Enter Britney to cheer them up. Or not. "We felt really confused as to what to do, so we thought, 'Let's try our approach - hanging out for months, listening to records, learning to trust each other, fighting and getting really intense - with a pop star.'

"So she comes in with her minder and her rules: 'She'll be available from four till seven, we want you to work on lyrics with her ...' Which was just bizarre. I'm lying on the floor of the studio with Britney and a notebook, working on lyrics. Now, I know what kind of lyrics I write and I can't imagine them coming out of her head. I was going, 'Come on, you must hate the world, let's write a song about it!'"

Britney, it turned out, wasn't ready to write a song full of angst and dark urges. Murphy, for his part, admits: "I have a thing about inane lyrics - the world doesn't need them." Still, he kept the notebooks, complete with Britney doodles. And he knows just what to do with them. "I'm going to eBay that shit."

Murphy's background gives no indication that he might one day become an arbiter of cool. He grew up in a nothing-to-do farming community in New Jersey, and spent his adolescence "breaking into half-built houses, kicking the windows out and getting wasted". His friend's dad was the local dentist so, one day, they stole his nitrous oxide tank. "It was like trucker speed," he says.

At school he managed to dodge the usual subcultural groups. "I had friends who were jocks or whatever ... Then around 12 or 13, kids get cliquish and cruel and that disgusted me. It seemed a reprehensible use of one's arbitrary social status. So I got really aggressive about it and became more of a weird kid."

After school, he worked as a telephone researcher for the American Physical Therapists Association - he had to cold call people at home and discuss their intestinal problems. There followed stints in book and record stores, although he insists he wasn't a typical High Fidelity-style supercilious clerk. "I never bothered anyone for their musical taste," he says.

When he was 17, he became a bouncer, a job he was given by his kickboxing teacher, who ran a local club. He only had to "drop" somebody once. "He was this white supremacist punk rock guy who'd come in and headbutt people. He was way bigger than me: 6ft 6in, 250lb - a huge dude. It was the scariest thing I ever had to do in my life. My boss gave me the code, so I punched him in the sternum. He went right down."

Murphy is surely the only fan of fey UK indie (the Smiths are a particular favourite) to become a nightclub bouncer. "I'm not some male aggro dude," he reassures me, cracking his knuckles (he does this a lot). "I'm not really Male Guy. I was never like, 'Hey, you want a piece of me?' I hate that."

Has he ever used his kickboxing skills since moving to New York? "No way. Are you kidding? I'm old and fat now. I'd fall apart." That said, when he was in a band in the mid-1990s he spent one interview challenging Oasis to a fight. All of Oasis.

He was always in bands, ever since he was 12 when he formed an outfit called the Extremes, who got the local preppy girls dancing to their funtime thrash metal. In 1992 there was the Pixies/Pavement soundalikes Pony, and between 1995 and 1997, Chicago math-rock combo Speedking, who were so hardline they would only release singles and wouldn't pose for photos.

In 1999, after he and Goldsworthy worked on David Holmes' Bow Down to the Exit Sign, DFA (it stands for Death from Above) were born. The pair were soon dropping quaaludes and knocking back pints of spirits with new discoveries the Rapture, "getting fucked up" and plotting world domination with their 21st century rock-dance hybrid. They began hosting parties - guestlist only, but anybody could be on the guestlist - and spinning the Stooges, Kraftwerk, ESG and Donna Summer, one crucial year ahead of Soulwax in their 2 Many DJs guise.

When other punk-rock wannabe New Yorkers began playing Can and Liquid Liquid between sets at rock clubs, Murphy panicked. "I was like, 'Fuck. I am no longer going to be hireable. And I just started making rent!' I started saying all those things I promised I'd never say, 'Oh, I was playing that record years ago.' I was so embarrassed by myself, but I was also really despondent. So I wrote a song about it."

That song was Losing My Edge, and the gag running through it is that Murphy was there at every key moment in rock and dance history. It's the ultimate list song. He's written another, the B-side to his latest single, Movement, which is, he says, a list of lists. Such as? "Top 25 Most Referential Guitar Licks! 1,400 Best Songs of All Time! Best 200 Make-Out Songs!" He admits he's enjoying his moment in the sun - "It's lovely; I got flown to Japan to DJ" - but realises it won't last. "I'm fully aware how transient cool is," he says. "And it's usually accompanied by a backlash."

Not quite yet. The second DFA compilation is an excellent introduction to the duo's production skills, while LCD Soundsystem's forthcoming debut album is a super-eclectic delight, ranging from Talking Heads to Eno homages to techno-pop to a Beatles pastiche. LCD's label, EMI, hopes the band will have the crossover success of the Flaming Lips. Murphy is quietly confident but typically self-effacing.

"I'm a bit of a Zelig," he decides. "I've always been a good imitator. I love music. But I'm just not that original."

· DFA Records Compilation #2 is out now on EMI. LCD Soundsystem's single, Movement, is also released this month, and their album is available in January, both on EMI