Exhibit 5.1


                    [LETTERHEAD OF GRAY, LAYTON, ET AL.]


                                 April 16, 2004

Digital Recorders, Inc.
Sterling Plaza, Box 26
5949 Sherry Lane, Suite 1050
Dallas, Texas 75225

Gentlemen:

      We have acted as counsel to Digital Recorders, Inc., a North Carolina
corporation (the "Company"), in connection with the authorization and issuance
of shares of the Company's Series F Convertible Preferred Stock, par value $.10
per share, and Series E Redeemable Nonvoting Convertible Preferred Stock, par
value $.10 per share (collectively, the "Preferred Stock"), those certain
convertible debentures in the aggregate original principal amount of $4,400,000
issued by the Company (collectively, the "Debentures") and warrants to purchase
common stock issued by the Company to the purchasers of the Debentures and to
certain other persons (collectively, the "Warrants"). On the date hereof, the
Company is filing with the Securities and Exchange Commission Pre-Effective
Amendment No. 1 to its Registration Statement on Form S-3 (registration no.
333-111534) (as amended, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"), relating to the proposed sale by the selling
shareholders identified in the Registration Statement of up to 3,543,893 shares
of the Common Stock, par value $.10 per share, of the Company issuable upon
conversion of the outstanding shares of Preferred Stock or the Debentures or the
exercise of the Warrants, plus such indeterminate number of additional shares of
such Common Stock that may become issuable pursuant to the anti-dilution or
other adjustment provisions contained in the Company's Articles of
Incorporation, as amended, relating to the Preferred Stock, or in the Debentures
or Warrants, and certain preferred stock purchase rights that accompany the
Common Stock (collectively, the "Shares"). At your request, this opinion is
being furnished to you for filing as Exhibit 5.1 to the Registration Statement.

      In connection with the foregoing, we have examined the originals or
copies, certified or otherwise authenticated to our satisfaction, of the
Registration Statement and such corporate records of the Company, certificates
of public officials and of officers of the Company, and other agreements,
instruments and documents as we have deemed necessary as a basis for the opinion
hereinafter expressed. As to various questions of fact material to such opinion,
we have relied upon statements of responsible officers of the Company.

      Based upon the foregoing and in reliance thereon, it is our opinion that
the Shares to be sold by the selling shareholders identified in the Registration
Statement have been duly authorized by the Company and, when issued upon
conversion of the Preferred Stock in

Digital Recorders, Inc.
April 16, 2004
Page 2


accordance with the terms of the Company's Articles of Incorporation, as
amended, or upon conversion of the Debentures or exercise of the Warrants in
accordance with their respective terms, will be legally issued, fully paid and
nonassessable.

      We are members of the Bar of the State of North Carolina and do not
purport to be experts in the laws of any state or jurisdiction other than the
State of North Carolina and the United States.

      We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus forming a part of the Registration Statement and to
the filing of this opinion as Exhibit 5.1 to the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.

                                    Respectfully submitted,

                                    GRAY, LAYTON, KERSH, SOLOMON, SIGMON,
                                    FURR & SMITH, P.A.



                                    By:  /s/ David Furr
                                        --------------------------------------
                                          David Furr