Daniel's ministry took place in the context of Israel's captivity to Babylon. Daniel 2 tells of a coming kingdom of God that will suddenly and decisively crush and replace the reigning Gentile kingdoms. As such it is an important section of Scripture for understanding the timing and nature of God's kingdom.
Not long after King Nebuchadnezzar of Babylon ascended the throne, he had a recurring dream that disturbed him greatly (2:1). Sensing the magnitude of his dream, the king summoned his wise men with an incredible demand. They were to relate the king's dream without being told of its contents and then interpret its meaning. Failure to do these things meant execution. They pleaded their case to the king, claiming the unfairness of such a request, but to no avail. On the verge of execution Daniel, who was also under the sentence of death, asked for time to beseech the Lord for the dream and its contents (2:18). "The mystery was revealed to Daniel in a night vision" (2:19) and after giving thanks to God Daniel gained access to the king to relate the dream and interpret its contents.
Daniel told Nebuchadnezzar that his dream concerned "what will take place in the latter days" (2:28) and "what would take place in the future" (2:29). In the king's dream he saw "a single great statue...which was large and of extraordinary splendor" (2:31). This single statue was made of various parts:
- Head of fine gold (2:32)
- Breast and arms of silver (2:32)
- Belly and thighs of bronze (2:32)
- Legs of iron (2:33)
- Feet partly of iron and partly of clay (2:33)
The king also saw a "stone" that "was cut out without hands" that struck the statue on its feet (2:34). The entire statue including the head of gold, the breast and arms of silver, the belly and thighs of bronze, the legs of iron and the feet of iron and clay "were crushed all at the same time" and became like "chaff" that was swept to the winds "so that not a trace of them was found" (2:35). The "stone" that struck the statue, however, "became a great mountain and filled the whole earth" (2:35).
Nebuchadnezzar's Dream Interpreted
Daniel then offered the interpretation of the great statue and the stone that destroyed the statue and grew into a great mountain. Concerning the head of gold Daniel told Nebuchadnezzar, "You are the head of gold" (2:38). Thus, the golden head represented Nebuchadnezzar and the kingdom of Babylon. Daniel does not explicitly say what the remaining three kingdoms of the statue represent but many scholars from the early church onward believed that the breast and arms of silver represented the kingdom of Medo-Persia which followed the Babylonian kingdom. It is also believed that the belly and thighs of bronze represented the kingdom of Greece and that the legs of iron referred to the kingdom of Rome (2:39–40). Rome was the most powerful and dominating kingdom of ancient times and is well described by iron. The feet of iron and clay indicate a kingdom related to the fourth iron kingdom of Rome, but this form of the kingdom in a latter state is not as stable since it has the element of "clay" associated with it. Daniel says this kingdom is "divided" and while strong also has a "brittle" element to it (2:41–42). Thus, this fourth kingdom begins as a very strong iron kingdom but then becomes less strong.
The "stone" that "was cut out without hands" is undoubtedly God's kingdom that is without human origin. The stone that strikes the feet of the statue then becomes "a great mountain that fills the whole earth." "Mountain" in this context is a symbol of a kingdom. Verses 44–45 state what this kingdom will do to the previous kingdoms:
In the days of those kings the God of heaven will set up a kingdom which will never be destroyed, and that kingdom will not be left for another people; it will crush and put an end to all these kingdoms, but it will itself endure forever. Inasmuch as you saw that a stone was cut out of the mountain without hands and that it crushed the iron, the bronze, the clay, the silver and the gold, the great God has made known to the king what will take place in the future; so the dream is true and its interpretation is trustworthy.
"In the days of those kings" is probably a reference back to the ten "toes" of the feet mentioned in verse 42. Thus, during the days of the final form of the fourth kingdom (Rome), the kingdom of God will "crush and put an end to all these kingdoms" and "will itself endure forever."
Daniel 2, therefore, teaches five kingdoms with the fifth and final kingdom crushing the others:
- Babylon (head of Gold)
- Medo-Persia (breast and arms of silver)
- Greece (belly and thighs of bronze)
- Rome (legs of iron) and later form of Roman empire (feet mixed with iron and clay)
- God's kingdom (a stone cut out without hands that becomes a great mountain)
The main point of Daniel 2 is that starting with Babylon there would be four major Gentile powers that would rule over the world and Israel, but a day is coming when God's kingdom will suddenly crush these kingdoms and itself will be established as a geo-political entity over the entire earth forever.
Note that when God's kingdom comes it dramatically and decisively destroys and replaces the existing four Gentile powers that preceded it. It does not co-exist as a spiritual kingdom alongside these literal kingdoms. As McClain states,
"Now it is deeply significant that in these visions the heavenly Kingdom comes down and destroys and supplants existing political powers" 
At one moment a stone from heaven shatters the Gentile kingdoms leading to the establishment of God's kingdom on earth. There is no gradual development of God's kingdom. It comes suddenly and decisively.
Debate has occurred as to whether this kingdom of God is a spiritual or earthly kingdom. This kingdom of God is spiritual in that it comes from heaven. But when this kingdom of God comes, it invades earth and takes over the realm in which the other four kingdoms ruled. Thus, it is an earthly kingdom as well in that it presides on the earth. The kingdom of God will be spiritual in origin but earthly in regard to the sphere of its existence and domain.
This earthly aspect of God's kingdom is evident in a connecting point between the fourth kingdom (Rome) and the fifth kingdom (God's kingdom). The fourth kingdom (Rome) "shatters all things" and "breaks in pieces" its enemies (2:40). Likewise, the fifth kingdom, God's kingdom, "will crush and put an end to all these kingdoms" (2:44). There is a parallel here—just as the fourth kingdom of Rome crushed all rival political kingdoms on earth, so too the kingdom of God will crush the earthly political kingdoms on the scene when it comes. The coming of God's kingdom is not progressively taking place over time; it is sudden. This is a stone that violently brings an end to the kingdoms that preceded it. The kingdoms that use to exist are like "chaff" that is swept away by strong winds.
Like the previous four kingdoms, God's coming kingdom is a real geographical and political kingdom that will exist over the entire earth. It radically replaces the Gentile kingdoms that came before it. In reference to Daniel 2, Blaising states,
"This kingdom is not simply a higher order of spiritual reality that coexists with the present course of affairs, but it is a complete replacement of present conditions on earth with a new worldwide and multinational world order" 
Some have argued that God's kingdom is the church, but this understanding is unlikely. According to Daniel 2:44–45, when God's kingdom is established it crushes and puts an end to the prevailing Gentile powers of the day who are swept away like chaff with no remnants remaining. This did not happen when the church began. The Roman Empire continued for centuries after the church started. There is no evidence that the leaders of the Roman Empire or anyone else believed their kingdom had been replaced by the Christian church. That would have been news to them. Instead, the kingdom of God of Daniel 2 replaces the fourth kingdom when it comes; it does not exist alongside in a spiritual sense. Plus, just as the four previous kingdoms were tangible geo-political entities, so too will God's kingdom be a geo-political entity. While the church has a mission to the nations, it is not a geo-political group like Babylon, Medo-Persia, Greece, or Rome. The coming Christian church simply is not the fifth kingdom of Nebuchadnezzar's dream statue.
The concept of reigning over the earth is an important one in Scripture. In the creation account God created man to rule and subdue the earth (Gen 1:26–28). While God had established a kingdom on earth with Israel (see 1 and 2 Samuel), a nation that was supposed to show God's glory to the other kingdoms of the world, Israel failed its mission and was judged and dispersed to the Gentile nations who would now rule over Israel. God's kingly authority over the earth would be given to Babylon and then to the kingdoms of Medo-Persia, Greece, Rome, and then a weaker but revived Roman Empire. But after this time period of Gentile domination or what Jesus called "the times of the Gentiles" (Luke 21:24) God's kingdom will be established over the entire earth and Israel will be restored. In sum, King Nebuchadnezzar's dream involved the broad panorama of human history from his day through the kingdom of Israel's Messiah.