[NEAL GERBER & EISENBERG LLP LETTERHEAD]

EXHIBIT 5.1

October 5, 2004

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Danielson Holding Corporation
       Registration Statement on Form S-8

Ladies and Gentlemen:

     We are counsel to Danielson Holding Corporation, a Delaware corporation (the “Company”), and in such capacity we have assisted in the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of the Company’s Registration Statement on Form S-8 (the “Registration Statement”) relating to (i) 4,000,000 shares of the Company’s common stock, par value $.10 per share (the “Common Stock”), that may be issued from time to time pursuant to the Danielson Holding Corporation Equity Award Plan for Employees and Officers and (ii) 400,000 shares of Common Stock that may be issued from time to time pursuant to the Danielson Holding Corporation Equity Award Plan for Directors (collectively, the “Plans”).

     In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company, such certificates of public officials and such other documents, and (iii) received such information from officers and representatives of the Company, as we have deemed necessary or appropriate for the purposes of this opinion.

     For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of all documents submitted to us as copies. We have also assumed the legal capacity of all natural persons, the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, the authority of such persons signing on behalf of the parties thereto other than the Company and the due authorization, execution and delivery of all documents by the parties thereto other than the Company. As to any facts material to the opinions expressed herein, we have relied upon the statements and representations of officers and other representatives of the Company and others.

     Based upon the foregoing, we are of the opinion that (i) the issuance by the Company pursuant to the Plans of the 4,400,000 shares of Common Stock that are registered on the Registration Statement have been duly and validly authorized by all necessary corporate action on the part of the Company and (ii) when issued and paid for as described in the Plans and the applicable agreements thereunder, such shares will be duly and validly issued and outstanding, fully paid and non-assessable shares of Common Stock.

     We are attorneys admitted to practice only in the State of Illinois, and we express no opinion as to any laws other than (i) the federal laws of the United States of America, (ii) the laws of the State of Illinois and (iii) the General Corporation Law of the State of Delaware.

     Please be advised that until October 5, 2004, David S. Stone, a partner of our firm, served as the Secretary and Acting General Counsel of the Company.

     We hereby consent to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

/s/ NEAL, GERBER & EISENBERG