In the Battle of Birch Coulee, an engagement of the US–Dakota War, Dakota warriors surround a detachment of 160 soldiers and fight them for thirty hours. Casualties for the soldiers number ninety-eight before relief troops from Fort Ridgely arrive. Dakota losses are unknown.

French Canadian voyageur, trader, and farmer Benjamin Gervais founds Little Canada. His gravestone describes him as "the first settler of St. Paul."

A celebration in St. Paul marks the impending completion of the Northern Pacific Railroad from St. Paul to the Pacific coast. The road is actually completed on September 8. Guests include railroad president Henry Villard, President Chester A. Arthur, Ulysses S. Grant, and General Phil Sheridan.

The state's first normal school opens in Winona with two teachers and twenty students. Normal schools were two-year colleges dedicated to training teachers.

For its first meeting, the territory's legislative assembly convenes in the Central House, located at Minnesota and Bench Streets in St. Paul. The Reverend Edward D. Neill gives the invocation, and the council meets in the parlor while the house sits in the dining room.

The Treaty of Paris is signed, ending both the Revolutionary War and, in theory, British control of what is now eastern Minnesota. In fact, British trading posts remain in the region until after the War of 1812.

A race riot begins during a dance at Stem Hall in St. Paul. Ignited by an alcohol violation, the riot continues through the next day, resulting in twenty-six arrests, numerous police and civilian injuries, and thousands of dollars in property damage from fire and vandalism, mostly in St. Paul's Selby–Dale neighborhood.

H. F. Pigman, a "human fly," loses his grip and falls seventy feet from the courthouse tower in Albert Lea. He survives the fall but sustains serious injuries. Said the Minneapolis Tribune of human flies, "When he meets with disaster his title to sympathy is decidedly clouded."

Martin McLeod is born in Montreal. Arriving at Fort Snelling in 1837, he would trade furs in the Minnesota Valley for twenty years, be instrumental in persuading the Dakota to sign the treaties of Mendota and Traverse des Sioux, and, as a member of the legislature, write the law that created the Minnesota Public School Fund. He died in 1860.

The first of the Selkirk colonists reach the Red River valley, where the Earl of Selkirk had claimed land covering much of present-day Manitoba and parts of present-day North Dakota and Minnesota. A flood, grasshoppers, and rivalries between fur companies in the 1820s eventually led to the colony's failure, and many of the settler colonists would move to the vicinity of Fort Snelling.