Niles's feelings for Daphne are a major running gag in the show, and he often makes clumsy attempts to woo her, with mixed results. However, he never actually tells her he loves her. The closest he comes is in the episode "The Ski Lodge," where he almost confesses but is interrupted.
While there's no clear-cut episode where Niles declares his love, the final episode of the series, "Goodnight, Seattle," shows a significant step in their relationship, as they finally start dating.