DaggerXL is a rewrite of Daggerfall's game engine that has been in development since June 2009. Originally a project being developed alongside another engine rewrite for LucasArts' Dark Forces (called DarkXL), in 2011 DaggerXL and DarkXL's code were merged to create the XL Engine.
The eventual goal of the project is to create an updated playing environment for Daggerfall, Dark Forces, Outlaws (by LucasArts), Blood (by 3D Realms & Monolith) and other classic games. The XL Engine will allow these games to run on modern operating systems natively (as opposed to being run in DOS, or through DOSBox). Past this, additional (Daggerfall-specific) goals include the implementation of features that were initially promised for Daggerfall, but were not or only partially coded in for the final release of the game.
As of early June 2011, the DaggerXL portion of the XL Engine supports the rendering of any province and many different dungeons with high resolution graphics (including smoothed terrain and Bloom) and basic gameplay, including basic leveling. Quests and the plot have not been integrated yet. Additional gameplay features and bugfixes currently being coded for future releases of DaggerXL, as well as ports to Linux and OS-X. In addition, a map editor is planned, which should allow for new exterior and interior cells to be included in Daggerfall as mods.
The XL Engine project had largely remained dormant for quite some time with it's last update being March 30th, 2014. However, the author, luciusDXL has released an update in November of this year. On December of 2015, the XL engine is now open source and available to the public, with plans for the Beta 1 to be released in 2016.
This article is based on the XL Engine section of the Daggerfall page on Wikipedia.