The Civil War brought great turmoil to Tahlequah from 1861 to 1865. The Cherokee Nation was split between the union-supporting party and the confederate party. Many buildings in the area were destroyed and by the end of the war, the two opposing parties were vying for control of Tahlequah. After the war, the United States Government required the Cherokee Nation to sign the Treaty of 1866, an agreement that meant a loss of land and reduced tribal control in the Cherokee Nation. Though it slowed the growth of business in Tahlequah, the Cherokees resisted building railroads because they felt more white settlement in their territory. They relied on steamboats via the Arkansas River for transporting goods. After the destruction of the Civil War, the people of Tahlequah began to rebuild. The first telephone system in Indian Territory came to Tahlequah in 1886. Mission schools were thriving under the guidance of Baptist and Presbyterian groups, with Methodist and Moravian groups also being influential. The female seminary at Park Hill burned in 1887 but was rebuilt in Tahlequah in 1889 and the first bank opened in 1891 on Muskogee Avenue. In 1894, the Dawes Commission arrived in Tahlequah and the United States Geological Survey began to survey the lands of Indian Territory in 1895.
Later that year, Tahlequah experienced a devastating fire that destroyed eighteen businesses, eight residences, thirteen offices and left fifty-eight people unemployed. After the devastation, the city council passed an ordinance that no more wooden buildings could be erected in the business district. Brick became the preferred building material.
The Ozark and Cherokee Central Railway arrived in 1902 connecting Tahlequah to Fayetteville, Arkansas. By 1905, Tahlequah had one brass band, several lawyers and doctors, three shoemakers, one undertaker, two national banks, four real estate firms, ten general merchandise stores, three hardware stores, three building contractors, two insurance firms, two steam gins, a transfer company, a billiard and pool hall, one entertainment and dancing hall and seven churches. The city also had a supply house, a skating rink, and a light and power plant and work had been begun on a public water works.
Upon statehood, Tahlequah became the county seat of Cherokee County, Oklahoma. By 1907, its population had reached more than 1,900.