The Supreme Court was split 5-4 in issuing Monday's ruling.
Chicago's ban was enacted in 1982 and until today has withstood several legal challenges.
The city is taking immediate action, already starting the process of crafting a new ordinance that has gun control measures but does not violate second amendment rights, they say.
Mayor Daley, who is an outspoken proponent of gun control, says he is disappointed by the ruling but says he will work to make sure only responsible adults have access to guns.
"Common sense tells you we need fewer guns on the street, not more guns," said Daley.
Daley pledged Monday afternoon to never give in to those who use guns to harm others. His statement came after the Supreme Court ruled Americans have the right to own a handgun for self-defense in their homes.
"I don't think more guns protect society. I just don't believe it," said Daley.
Daley was joined by anti-violence activists and the city's top attorney, Mara Georges, who said the ruling does not strike down Chicago's nearly 30-year-old handgun ban. Instead, that decision will be made by a federal appeals court which will likely overturn the ban.
"We are in the process of drafting an ordinance to promote safe and responsible gun owner ship that complies with the court's ruling in this case," said Georges. Georges says new regulations will go before the City Council in an expedited manner. On Monday morning, the City Council's Police and Fire committee began working on new gun control restrictions to both protect second amendment rights and Chicagoans from gun violence.
"I'm concerned there will be an increase in accidental shootings. We need to look at the current ordinances on the books to see how this affects us," said Ald. Deborah Graham, 27th Ward.
The aldermen are considering various measures, including limiting the number of firearms that can be owned, mandating insurance and training for gun-owners and creating a gun registry. These measures are similar to those in enacted in Washington, D.C. after the Supreme Court ruled two years ago that its handgun ban is unconstitutional.
Legal experts say it will be several months before the 7th Circuit Court of Appeals strikes down Chicago's handgun ban. In the meantime, it is still being enforced by police.
"People should not think they can walk around the streets of Chicago with a gun. We arrest people everyday," said Supt. Jody Weis, Chicago Police Department.
Meanwhile, those who believe in a person's right to bear arms say Monday's ruling is a victory.
"The law-abiding citizens who are part of this case an support the court's decision today are not and have never been the crime problem in Chicago," said David Sigale, co-plaintiff.
Gun rights activists say they plan to fight any new restrictions they say are too strict, and violate the intent of the High Court's decision.