Army service
According to Clarendon, O'Neill had spent many years between the court and Low Countries, "the winter season in one and the summer always in the army in the other; as good an education towards advancement in the world as that age knew". Lee states he was a volunteer under Sir Horace Vere fighting the Spanish in the Low Countries before 1635, and may have been under the direct command of Vere's nephew Lord Edward Conway. His uncle Owen Roe O'Neill was fighting there for the Spanish and D'Alton claims Daniel kept him abreast of affairs at home.
In 1635 Lord Conway petitioned Archbishop Laud for help in getting O'Neill fairly treated by Montgomery and Hamilton. On several occasions, Laud wrote to Thomas Wentworth (later Earl of Strafford), who was the Lord Deputy of Ireland. Wentworth promised to do his best and had sent for Montgomery's and Hamilton's agents to treat with him. There was little chance of his father's lands being restored, but there was a strong case that Montgomery and Hamilton should pay a fair rent on the land Daniel (and his brother) had inherited. Success arguably relied on Montgomery's and Hamilton's good will. Daniel was not destitute, but his share of the £160 received in rents likely prevented Daniel advancing in society. Wentworth was also petitioned by Prince Charles, the elector Palatine and promised to "... endeavour cheerfully to procure Mr Oneale [sic] contentment ..." Wentworth likely helped progress Daniel's career, but not his fortune. After a summer probably fighting in the Low Countries, Daniel swore the oath of allegiance and was granted a pass "to go beyond the seas" with two servants in December 1636. He fought at the (fourth) Siege of Breda in 1637 where he sustained a thigh wound and was forced to return to England to recuperate.
His petitioning hadn't stopped and had likely become a nuisance with importuning His Majesty (Charles 1 of England), which resulted in a rebuke for Wentworth. In 1638 Wentworth wrote to His Majesty describing O'Neill as a "vey slight and busy person" who was very conversant at Thomas Howard's Arundel House and dependent (for an annuity of £400) on the Earl of Antrim, Randal MacDonnell. He enclosed a passage from a letter by O'Neill to Captain Byron and assured the King he would "so colour the matter, as to take away all thought of ... going to Carlisle". According to Fitpatrick's commentary this was to warn the King against fighting the Scottish Covenanters that started the Bishops' Wars in 1639. O'Neill was captain of a troop of horse, "to which he was by all men held very equal, having had good experience in the most active armies of that time, and a courage very notorious". Charles 1 believed in the divine right of Kings and thought he could raise an army and win against the Covenanters without the support of Parliament. The war effectively ended in a truce later that year and a retreat from Berwick. O'Neill went to Breda with letters for the Queen of Bohemia. He was in Ireland by April 1640, where he was made a freeman of the borough of Belfast. Following a request at Breda by Sir John Conyers to Lord Conway, O'Neill was promoted to major within Conyers' regiment where he fought in the second Bishops' War. At the Battle of Newburn on 28 August 1640, Conway was ordered by Wentworth (now Earl Strafford) to prevent Leslie's army crossing the river, despite being outnumbered 4 to 1. O'Neill was in a cavalry charge where he was subsequently captured along with Lord Wilmot's son, Sir John Digby and many others. Lord Conway's troops retreated under cover of darkness to Durham. Leslie treated his prisoners well and they were released at the Treaty of Rippon in October 1640. By April 1641, O'Neill was back in Conyer's regiment, when he took his case against Montgomery and Hamilton to the House of Lords. The case was dismissed because O'Neill had not taken it to the lower courts first.