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[LETTERHEAD OF PENN
NATIONAL GAMING, INC.]

October  10, 2007

Via EDGAR and Facsimile

United States
Securities and Exchange Commission

Division of
Corporation Finance

100 F Street,
N.E.

Mail
Stop 3561

Washington,
D.C.  20549

  Attention:

  Daniel Morris

  Attorney Advisor

  Re:

  Penn National Gaming, Inc. (the “Company”)

  Definitive 14A

  Filed April 30, 2007

  File No. 000-24206

Ladies and Gentlemen:

This letter responds to the Staff’s comment letter
dated August 21, 2007 regarding the Company’s Definitive Schedule 14A filed on
April 30, 2007 (the “2007 Proxy Statement”).
For your convenience, each Staff comment has been reproduced, followed
by the Company’s response.

Compensation Committee, page 3

1.                                       Please
provide a more detailed discussion of the compensation committee’s scope of
authority.  For instance, you note that
the committee “coordinate[s] the Board’s role in establishing performance
criteria.”  The meaning of this
disclosure is unclear.  Please expand
your disclosure to discuss the differing responsibilities of the compensation
committee and the board of directors.
Refer to Item 407(e)(3)(i)(A) of Regulation S-K.

RESPONSE:  In our future filings with
the Securities and Exchange Commission (the “Commission”) requiring disclosure
pursuant to Item 407(e), we intend to include a detailed discussion of the
compensation committee’s scope of authority.
We anticipate that this discussion will describe the matters over which
the compensation committee has been given decision-making authority (as
delegated by the full Board and as further described in the compensation
committee charter), such as setting the Chief Executive Officer’s and other
executive officers’ salary, bonus, incentive awards (including recommending to
the Board any performance-based annual incentive plan and establishing related
performance measures), stock options and other benefits, as well as the matters
which the compensation committee reviews and makes recommendations on to the full
Board, such as non-employee director compensation and establishment of new
equity compensation plans.  In addition,
future disclosure will make clear that, in coordinating the Board’s role in
establishing performance criteria for the Company’s executive officers, the
compensation committee is responsible for setting the compensation for the
Company’s executive officers and, in carrying out that

United States Securities and Exchange Commission

Daniel Morris

October 10, 2007

page 2

responsibility, has the authority
to make determinations, with management’s input, regarding the criteria it will
use in setting such compensation.

2.                                       Please
expand your discussion of the functions performed by Strategic Apex Group, your
compensation consultant, to more fully address the nature and scope of the
consultant’s assignment, including its role in determining and recommending
compensation, and any other material elements of the consultant’s performance
of its duties under the engagement.
Refer to Item 407(e)(3)(iii) of Regulation S-K.

RESPONSE:  In our future filings with the Commission
requiring disclosure pursuant to Item 407(e), we intend to include a detailed
discussion of the nature and scope of duties of Strategic Apex Group and any
compensation consultants utilized in setting executive and director
compensation.   In the case of Strategic
Apex Group, this discussion is expected to include, for example, that Strategic
Apex attends the majority of the compensation committee meetings and provides
assistance and advice regarding executive and director compensation to the
compensation committee, which includes accumulating and summarizing market data
at the request of the compensation committee regarding compensation of the
Company’s executives in comparison to its competitors.  Strategic Apex Group also gathers data and
provides advice regarding the Company’s performance relative to the appropriate
peer group of competitor companies, the structure of annual and long-term
incentive compensation, the appropriateness of financial and other performance
measures and the design of equity incentive plans.

Nominating Committee,
page 4

3.                                       It
appears you have provided a summary of the procedural requirements, such as
timing of notices, related to the submission of shareholder nominations.  Please also provide a summary of the
substantive (informational) requirements, as set forth by the bylaws, for
director recommendations submitted by shareholders.  Refer to Item 407(c)(2)(ii) of Regulation
S-K.

RESPONSE:  In our future filings with
the Commission requiring disclosure pursuant to Item 407(c), we intend to
include a summary of the substantive requirements, as set forth in our bylaws,
for director recommendations submitted by shareholders.

Compensation of
Directors, page 5

4.                                       For
each director, please disclose by footnote to the option awards column of the
director compensation table the grant date fair value of each equity award
computed in accordance with FAS 123R.
See Instruction to Regulation S-K Item 402(k)(2)(iii) and (iv).

RESPONSE:  During 2006, each
non-employee director of the Company received options to purchase 30,000 shares
of Company common stock.  As required by
the Instruction to Item 402(k)(2)(iii) and (iv) of Regulation S-K and clarified
by Question

United States Securities and Exchange Commission

Daniel Morris

October 10, 2007

page 3

12.03 of the Compliance
and Disclosure Interpretations regarding Item 402 of Regulation S-K, footnote 1
to the Director Compensation Table of the Proxy Statement indicates that the
grant date fair value of options granted to each director was $439,515.   The Company intends
to continue to include the relevant disclosure in future filings with the
Commission requiring disclosure pursuant to Regulation S-K Item 402(k)(2)(iii).

Compensation Program
Design, page 25

5.                                       We
note that you have identified the companies comprising the peer group that you
have relied upon for benchmarking purposes.
If you have benchmarked different elements of your compensation against
different benchmarking groups, please identify the companies that comprise each
group.  Refer to Item 402(b)(2)(xiv) of
Regulation S-K.  This disclosure should
include a discussion of where you target each element of compensation against
the peer companies and where actual payments fall within targeted parameters,
which should include an explanation of the reasons actual compensation fell
outside of a targeted percentile range, as you have done for the base salary
component of your compensation program.

RESPONSE:  We have not and do not
intend to use different benchmarking groups for different elements of
compensation.  However, in the future, if
different elements of compensation for our named executive officers are
benchmarked against different groups, we will identify each peer group and
where we targeted the compensation element against the peer group, along with
an explanation of why each target was chosen.
We intend to provide such identification and explanation in our future
filings with the Commission requiring the inclusion of Compensation Discussion
and Analysis.  In addition, to the extent
actual payments are outside of the targeted range, we intend to provide an
explanation of the reasons for the variation.

6.                                       The
Compensation Discussion and Analysis should be sufficiently precise to capture
material differences in compensation policies with respect to individual named
executive officers.  Refer you [sic] to
Section II.B.I of Commission Release No. 33-8732A.  Please provide a detailed analysis of how and
why the compensation of Mr. Carlino differs from that of the other named
executive officers.  If policies or
decisions relating to a named executive officer are materially different than
the other officers, please discuss on an individualized basis.

RESPONSE:  In our future filings with
the Commission requiring the inclusion of Compensation Discussion and Analysis,
to the extent our Chief Executive Officer’s compensation materially differs
from that of the other named executive officers, we intend to identify the
material differences and provide an explanation of the reasoning behind such
material differences.  In addition, to
the extent there are material differences in the compensation policies or
decisions regarding the other named executive officers, we intend to provide
similar disclosure regarding such material differences.

United States Securities and Exchange Commission

Daniel Morris

October 10, 2007

page 4

Elements of the
Compensation Program, page 26

7.                                       Please
expand your analysis of the elements and levels of compensation paid to the
named executive officers.  Throughout
your Compensation Discussion and Analysis, and as to each compensation element,
you should provide an analysis of how you arrived at and why you paid each
particular level and form of compensation for 2006.  For example, you state that base salaries are
targeted at the 50th percentile and then adjusted based upon
several factors.  For each named
executive officer, please specifically explain how the amount of their current
base salary, including the 2006 salary increases, was determined.  As another example, your discussion of your
annual incentive program does not explain why the target annual incentive
percentages for the chief executive officer and other named executive officers
differ.  Please revise your Compensation
Discussion and Analysis such that investors are provided with an understanding
of the specific factors considered by the committee in ultimately approving
particular pieces of each named executive officer’s compensation package and
describe the reasons why the committee believes that the amounts paid to each
named executive officer are appropriate in light of the various items it
considered in making specific compensation decisions.  Refer to Item 402(b)(l)(v) of Regulation S-K.

RESPONSE:
 In our future filings
with the Commission requiring the inclusion of Compensation Discussion and
Analysis, we intend to provide an expanded discussion of the elements and
levels of compensation paid to named executive officers, which is expected to
include an analysis of how amounts were arrived at and why particular levels
and forms of compensation were paid for the relevant year.  As indicated in our responses above, we
intend to discuss, with specificity, the reasoning behind particular benchmark
targets chosen and the actual amounts paid as well as the reasoning behind
material differences, if any, in compensation policies or decisions regarding
named executive officers.  We intend to
include in our future disclosures a discussion of the specific factors
considered by the compensation committee in setting the elements of the named
executive officers’ compensation and the reasons why the compensation committee
believes amounts paid to the named executive officers are appropriate.

Annual Incentive, page 27

8.                                       We
note that you have not provided a quantitative discussion of the terms of the
necessary targets to be achieved in order for your executive officers to earn
their 2006 incentive compensation.
Please disclose these targets and explain how your incentive awards are
specifically structured around such targets.
Please note that qualitative goals generally need to be presented to
conform to the requirements of 402(b)(2)(v).
To the extent you believe that disclosure of the targets is not required
because it would result in competitive harm such that the targets could be
excluded under Instruction 4 to Item 402(b) of Regulation S-K, please provide
on a supplemental basis a detailed explanation for such conclusion.  Please also note that to the extent that you
have an appropriate basis for omitting the specific targets, you must discuss
how difficult it would be for the named

United States Securities and Exchange Commission

Daniel Morris

October 10, 2007

page 5

executive
officers or how likely it will be for you to achieve the undisclosed target
levels or other factors.  General
statements regarding the level of difficulty, or ease, associated with
achieving performance goals either corporately or individually are not
sufficient.  Please provide insight into
the factors considered by the committee prior to the awarding of
performance-based compensation such as historical analyses prior to the
granting of these awards or correlations between historical bonus practice and
the incentive parameters set for the relevant fiscal period.

RESPONSE:  The annual cash incentive
compensation awards for the named executive officers for 2006 were based upon
both Company and individual performance.
Based on the rapid growth of the Company (fueled in large part by significant
acquisitions), specific year-end performance targets were neither approved by
the compensation committee nor formally communicated to the participants at the
outset of the 2006 fiscal year.  The
compensation committee did discuss a range of potential annual incentive award
amounts (50% to 100% of base salary) in advance of the 2006 fiscal year.  The actual incentive awards were determined
at the discretion of the compensation committee subsequent to the end of 2006,
after extensive discussion by the committee and based on a review and
assessment of the Company’s EBITDA results and the individual contributions of
each executive officer by the Chief Executive Officer.  Although the fact that the Company’s 2006
EBITDA exceeded the Company’s EBITDA guidance was a significant reason for the
committee’s decision to grant the bonus awards, there was no pre-established
2006 performance target required to be achieved for the bonuses to be awarded.

For 2007, the committee
has implemented a formal incentive compensation plan, which directly links
incentive awards to the Company’s achievement of certain pre-established EBITDA
and free cash flow targets.  The new plan
was approved by shareholders at the 2007 annual meeting and is designed to be
compliant with Section 162(m) of the Internal Revenue Code of 1986.  Because of the shift from discretionary
bonuses in previous years, the Company’s Compensation Discussion and Analysis
in the 2007 Proxy Statement discusses the plan for 2007 and discloses the
quantitative targets for 2007 performance.
In addition, for future filings with the Commission requiring the
inclusion of Compensation Discussion and Analysis, to the extent applicable, we
intend to continue to include the quantitative performance targets unless
disclosure of such targets will cause the Company competitive harm.

9.                                       Your
disclosure suggests that different elements of compensation (such as base
salary and incentive compensation) are significantly impacted by individual
performance.  Please provide additional
detail and an analysis of how individual performance contributed to actual 2006
compensation for the named executive officers.
For example, disclose the elements of individual performance, both
quantitative and qualitative, and specific contributions the compensation
committee considered in its evaluation, and if applicable, how they were
weighted and factored into specific compensation decisions.  In addition, please expand your discussion
and analysis of the factors the committee considered in

United States Securities and Exchange Commission

Daniel Morris

October 10, 2007

page 6

establishing
personal objectives for Mr. Carlino.  See
Item 402(b)(2)(vii) of Regulation S-K.

RESPONSE:  In our future filings with
the Commission requiring the inclusion of Compensation Discussion and An