In 1859, he was the Republican candidate in a special election for a vacancy in the 36th Congress caused by the death of Thomas L. Harris, but he was defeated by John A. McClernand.

During the American Civil War, Palmer served in the Union army, rising from the rank of colonel to that of major general in the volunteer service.

He was commissioned Colonel of the 14th Illinois Infantry, serving under his friend John C. Fremont in an expedition to Springfield, Missouri, to put down the rebellion in that state.

Retaking the field in September, he was assigned by William S. Rosecrans[note 1] to command the first division of the Army of the Mississippi in Alabama and Tennessee.

On November 29, 1862, he was promoted to major general of volunteers and was conspicuous in the Battle of Stones River, where his division held a vital position within the Union lines.

As Kentucky's military governor, Palmer established such control by two methods: waging a hard war against guerrillas and achieving the end of slavery in a state not bound by the Emancipation Proclamation.

"[citation needed] Palmer, one of the organizers of the Republican Party in Illinois, was an avowed abolitionist who had received his assignment from his friend, the president, specifically to implement military policies to end slavery in the state.

In the next few months, Palmer carried out Lincoln's directive with persistence, which belied the initial impression he gave the legislature that he intended to appease the state's loyal white populace.

Not only did he actively enlist all able-bodied black men at an unprecedented rate—often with the assistance of all-black recruiting squads, and despite the legislature's strident objection to the continued presence of black troops in the state—he sustained martial law in the state to override the state's civil courts and governments because of their evident unwillingness to assume "their clear and positive duty to protect the people from forcible wrongs, whether inflicted under the forms of law or otherwise.

"[citation needed] He legitimated slave marriages to protect the wives and children of enlisted men (in part a response to the Camp Nelson embarrassment), established refugee camps, fended off efforts by various municipal governments to expel freedom seekers and free blacks alike and deny them the opportunity to find employment, released enslaved people from jails and workhouses, ordered that no bondman should be forced into service as substitutes, and issued tens of thousands of travel passes enabling African Americans to move freely within and without the state in search of employment.

At an African American Fourth of July celebration at Louisville's camp—one that followed a parade through the city streets, including some fifteen hundred armed black and white soldiers and band—Palmer, arriving in a gilded circus chariot, told an estimated twenty thousand attendees, most of whom he had already been assured believed the general was there to declare them free (and who he claimed later he set out to inform otherwise), "My countrymen, you are free, and while I command in this department the military forces of the United States will defend your right to freedom.

"[citation needed] That one of its circuit courts was soon to strike down Congress's act of March 3, 1865, liberating black soldiers' dependents—some 72,045 individuals, or by one USCT officer's estimate, "[t]wo and one half persons freed, for each Colored Soldier enlisted in the State of Kentucky" and two-thirds of the enslaved people in the state—only fueled the general's intent to cure the state's white residents of "Negrophobia in its worst form.

"[citation needed] He was soon met with an indictment by Louisville's grand jury for aiding freedom seekers and a wave of lawsuits from dispossessed Kentucky enslavers.

[3] He also advocated for establishing reform schools for youthful offenders, deeming capital punishment "a vestige of barbarism" and believing that contact with repeat criminals at prisons would worsen their habits.

[4] In the aftermath of the 1871 Chicago Fire, Palmer called for the state legislature to hold a special session on October 13, making roughly $3,000,000 available for relief.

When legislators questioned the Constitutionality of providing such funds, Palmer issued a message highlighting the General Assembly's promise in an 1865 act to refund money spent by Chicago in constructing the Illinois and Michigan Canal.

Without informing Palmer, the city's mayor, Roswell Mason, subsequently proclaimed on October 11 that Sheridan was in charge of maintaining order there.

Then-Commanding General of the Army William T. Sherman obliged, and Palmer appealed the decision to then-President Ulysses Grant, who defended the action on practical grounds.

This incident, alongside Palmer's dislike of high protective tariffs during peacetime and his general inclination toward state sovereignty, influenced the Governor's decision to join the Liberal Republican movement in 1872.

At the 1896 presidential convention, one of Palmer's main Illinois rivals was Governor John Peter Altgeld, who succeeded in getting a candidate, former Illinoisan William Jennings Bryan, nominated for the presidency.

An article in the libertarian The Independent Review argues that in waging this quixotic campaign, he was a crucial figure in the "last stand" of classical liberalism as a political movement in the 19th century.

[13] Palmer and the other founders were disenchanted Democrats who viewed the party as a means to preserve the small-government ideals of Thomas Jefferson and Grover Cleveland, which they believed had been betrayed by Bryan.

Although he could have made up for this with a youthful running mate, he instead chose 73-year-old Simon Bolivar Buckner, in part because it was thought that the idea of two former generals, one Union and one Confederate, teamed up would emphasize national unity and ease the still-lingering resentment in the South from the Civil War.

[citation needed] Following the conclusion of his Senate term, Palmer returned to Springfield, Illinois, resuming his law practice and writing his memoirs, The Story of an Earnest Life, with the assistance of his wife.