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The government of the Northwest Territory was begun in Marietta (now in Ohio) on July 15, 1788. Arthur St. Clair was the appointed governor. Formation of county governments was begun. Knox County was formed June 20, 1790 with Vincennes as the county seat. The county was much bigger than the present state of Indiana.
A major problem for the government of the Northwest Territory was relations with the Indian tribes. There was continuing unrest and hostility between the Indians and the settlers.
American General Anthony Wayne led a major defeat of Indian tribes at the Battle of Fallen Timbers, August 20, 1794. The resulting Treaty of Greenville was signed on August 3, 1795. "About two thirds of the future state of Ohio and a small portion of southeastern Indiana was thus freed of Indian claims plus sixteen small tracts at the portages and along the river routes. In Indiana these included the Wabash-Maumee portage, Ouiatanon, Clark's Grant, and the Vincennes Tract around the village on the Wabash." The Indian tribes received $20,000 in goods and were promised annual goods valued at $9,500. The annual goods were split into $1,000 or $500 portions for each individual tribe.
The territory moved to the second stage of government on October 29, 1798. William Henry Harrison was elected the first delegate to Congress from the territory in 1799. There was much political agitation about the new financial burdens of government and about civil rights by residents in the western part of the territory. An example of the agitation, excerpted from a Knox County petition, is provided on this page. Harrison helped in the passage of legislation to divide the territory into two governments.
Sources: Barnhart and Riker, 272-74, 280-94, 301-5, 308-12.