This hadith is found in Sunan al-Tirmidhî (154). It is an authentic hadîth, and this has been demonstrated by Ibn al-Qattân [Bayân al-Wahm wa al-Ihâm (2512)] and Ibn Taymiyah [Majmû` al-Fatâwâ (22/97)]
This hadith refers to the preferred time to offer the Fajr (Morning) Prayer. Scholars disagree as to how it should be interpreted. They agree, however, that the timeframe for the Fajr prayer is from dawn to sunrise.
In his encyclopedic legal reference al-Mughnî, Ibn Qudâmah asserts that there is scholarly consensus that the time for the Fajr prayer commences with the arrival of the true dawn. The true dawn can be distinguished from the false dawn in that it appears as a clear white line along the horizon.
The time for the Fajr prayer comes to an end with the start of sunrise. The evidence for this is as follows:
The Prophet (peace be upon him) said: “The time for the morning prayer is from the arrival of dawn up until sunrise.” [Sahîh Muslim (173)]
He also said: “Whoever offers one unit of the morning prayer before sunrise has achieved the morning prayer.” [Sahîh al-Bukhârî (579) and Sahîh Muslim (608)]
Once, someone came to the Prophet (peace be upon him) and asked about the timeframe of the prayers. The Prophet (peace be upon him) did not give him any answer (as he preferred to demonstrate the answer by action). He ordered Bilâl to offer the call for the Fajr prayer so that it could be performed at the crack of dawn. The people could barely make out each other’s features. On the following day, he delayed Fajr so much that, when the people had finished praying, someone commented that the Sun was rising or was just about to rise. Then he summoned the questioner and said: “The timeframe for the prayers is between these two times. [Sahîh Muslim (614)]
This hadîth is quite long and discusses how the Prophet (peace be upon him) demonstrated the times of all five prayers in this way. I have sufficed here with mentioning what relates to the Fajr prayer.
As for the preferred time for offering the Fajr prayer, this is where the disagreement comes in.
The majority of scholars agree that it is a preferred sunnah to offer the Fajr prayer at the beginning of its time, before the darkness of the night is dispelled.
They cite as evidence that `A’ishah said: “We, the believing women, performed our Fajr prayer along with the Prophet (peace be upon him) wrapped up in their shawls. Then they would depart for their homes as soon as they completed their prayers without being able to recognize one another because of how dark it was. [Sahîh al-Bukhârî (578) and Sahîh Muslim (645)]
This indicates that the prayer should be performed early. This is the view of Mâlik, Shâfi`î, and Ahmad and their respective schools of thought.
The view of Abû Hanifah, on the other hand, is that it is preferred to postpone the prayer until the sky becomes light.
They cite as evidence the hadîth that the Prophet (peace be upon him) said: “Offer the morning prayer in the morning, for this is greater for your reward.” [Musnad Ahmad (4/140), Sunan Abî Dâwûd (424), and Sunan Ibn Mâjah (672)]
This understanding is even more clearly discernable in the narration of al-Tirmidhî that which reads: “Offer the morning prayer in the light of the morning…”
However, there are two ways that the majority of scholars respond to the apparent meaning of this hadîth:
1. What is meant by offering the prayer in the “light of the morning” is the time when the prayer should be completed. This means that the hadîth is encouraging us to prolong our morning prayers so that by the time we finish them it has started to grow light outside.
This interpretation is supported by the hadîth related by Abû Barzah al-Aslamî where he says: “Allah’s Messenger (peace be upon him) used to turn to finish his morning prayers at a time when a person could recognize the person who was sitting next to him. He would recite between 60 and 100 verses.” [Sahîh al-Bukhârî (547) and Sahîh Muslim (647)]
2. It is possible that what the Prophet (peace be upon him) meant by it was to wait until it was certain that dawn had arrived and not start the prayer on the basis of an assumption. The Prophet (peace be upon him) always waited until it was verified with certainty that dawn had arrived except on one occasion when he was in Muzdalifah when he prayed it earlier than was his habit.
This shows that the first opinion, that the prayer should be prayed as early in the morning as possible, is the most correct one.
And Allah knows best.