Nebraska's first inhabitants, from about 10,000 BC, were nomadic Paleo-Indians. Successive groups were more sedentary, cultivating corn and beans. Archaeological excavations indicate that prolonged drought and dust storms before the 16th century caused these inhabitants to vacate the area. In the 16th and 17th centuries, other Indian tribes came from the East, some pushed by enemy tribes, others seeking new hunting grounds. By 1800, semisedentary Pawnee, Ponca, Omaha, and Oto, along with several nomadic groups, were in the region.
The Indians developed amiable relations with the first white explorers, French and Spanish fur trappers and traders who traveled through Nebraska in the 18th century, using the Missouri River as a route to the West. The area was claimed by both Spain and France and was French territory at the time of the Louisiana Purchase, when it came under US jurisdiction. It was explored during the first half of the 19th century by Lewis and Clark, Zebulon Pike, Stephen H. Long, and John C. Frémont.
The Indian Intercourse Act of 1834 forbade white settlement west of the Mississippi River, reserving the Great Plains as Indian Territory. Nothing prevented whites from traversing Nebraska, however, and from 1840 to 1866, some 350,000 persons crossed the area on the Oregon, California, and Mormon trails, following the Platte River Valley, a natural highway to the West. Military forts were established in the 1840s to protect travelers from Indian attack.
The Kansas-Nebraska Act of 1854 established Nebraska Territory, which stretched from Kansas to Canada and from the Missouri River to the Rockies. The territory assumed its present shape in 1861. Still sparsely populated, Nebraska escaped the violence over the slavery issue that afflicted Kansas. The creation of Nebraska Territory heightened conflict between Indians and white settlers, however, as Indians were forced to cede more and more of their land. From mid-1860 to the late 1870s, western Nebraska was a battleground for Indians and US soldiers. By 1890, the Indians were defeated and moved onto reservations in Nebraska, South Dakota, and Oklahoma.
Settlement of Nebraska Territory was rapid, accelerated by the Homestead Act of 1862, under which the US government provided 160 acres (65 hectares) to a settler for a nominal fee, and the construction of the Union Pacific, the first transcontinental railroad. The Burlington Railroad, which came to Nebraska in the late 1860s, used its vast land grants from Congress to promote immigration, selling the land to potential settlers from the East and from Europe. The end of the Civil War brought an influx of Union veterans, bolstering the Republican administration, which began pushing for statehood. On 1 March 1867, Nebraska became the 37th state to join the Union. Farming and ranching developed as the state's two main enterprises. Facing for the first time the harsh elements of the Great Plains, homesteaders in central and western Nebraska evolved what came to be known as the sod-house culture, using grassy soil to construct sturdy insulated homes. They harnessed the wind with windmills to pump water, constructed fences of barbed wire, and developed dry-land farming techniques.
Ranching existed in Nebraska as early as 1859, and by the 1870s, it was well established in the western part of the state. Some foreign investors controlled hundreds of thousands of acres of the free range. The cruel winter of 1886–87 killed thousands of cattle and bankrupted many of these large ranches.
By 1890, depressed farm prices, high railroad shipping charges, and rising interest rates were hurting the state's farmers, and a drought in the 1890s exacerbated their plight. These problems contributed to the rise of populism, a pro-agrian movement. Many Nebraska legislators embraced populism, helping to bring about the first initiative and referendum laws in the US, providing for the regulation of stockyards and telephone and telegraph companies and instituting compulsory education.
World War I created a rift among Nebraskans as excessive patriotic zeal was directed against residents of German descent. German-language newspapers were censored, ministers were ordered to preach only in English (often to congregations that understood only German), and three university professors of German origin were fired. A Nebraska law (1919) that prohibited the teaching of any foreign language until high school was later declared unconstitutional by the US Supreme Court.
Tilling of marginal land to take advantage of farm prices that had been inflated during World War I caused economic distress during the 1920s. Nebraska's farm economy was already in peril when the dust storms of the 1930s began, and conditions worsened as drought, heat, and grasshopper invasions plagued the state. Thousands of people, particularly from the southwest counties in which dust-bowl conditions were most severe, fled Nebraska for the west coast. Some farmers joined protest movements—dumping milk, for example, rather than selling at depressed prices—while others marched on the state capital to demand a moratorium on farm debts, which they received. In the end, federal aid saved the farmers.
The onset of World War II brought prosperity to other sectors. Military airfields and war industries were placed in the state because of its safe inland location, bringing industrial growth that extended into the postwar years. Much of the new industry that developed during the postwar era was agriculture-related, including the manufacture of mechanized implements and irrigation equipment.
Farm output and income increased dramatically into the 1970s through wider use of hybrid seed, pesticides, fungicides, chemical fertilizers, close-row planting, and irrigation, but contaminated runoff adversely affected water quality and greater water use drastically lowered water-table levels. Many farmers took on large debt burdens to finance expanded output, their credit buoyed by strong farm-product prices and exports. When prices began to fall in the early 1980s, many found themselves overextended. By spring 1985, an estimated 10% of all farmers were reportedly close to bankruptcy. In the early 1990s farm prices rose; the average farm income in Nebraska rose more than 10% between 1989 and the mid-1990s. Increasingly, the state had fewer, larger, and more-mechanized farms. The growth of small industries and tourism also bolstered Nebraska's economy in the 1990s. By 1999 the state enjoyed one of the lowest unemployment rates in the nation—2.9%. But farmers were struggling again; by June 2000, areas of the state had had no substantial rain in a year. The previous autumn and winter were the driest on record. Drought conditions prevailed. Even with mitigation efforts, much of the state's corn crop was lost.
A wildfire in the Sandhills of Nebraska's panhandle in 1999 scorched 74,840 acres and claimed 25,000 trees; it was the largest fire in the state's history.
Challenges facing the state include a loss of population in rural areas, urban decay, and tension among various ethnic groups. In 1998 there were more Hispanics, accounting for 4.4% of the population, in the state than there were African Americans; Nebraska also has a small Native American population. Water conservation to avoid depletion of the state's aquifers for irrigation purposes remains a major priority. In 2003, the state legislature was considering the legalization of up to eight gambling casinos, a raise in the minimum wage, tax incentives, and a concealed-weapon law. Governor Mike Johanns urged lawmakers not to raise income or sales taxes, and to cut state agencies by 10%. Nebraska was facing its worst recession since the 1980s in 2003, along with severe drought.