The Indians resisted white incursions and Major General  Patrick E. Connor's Powder River Expedition failed to stop their depredations. In 1866 the government, under public pressure and officially attracted to the gold resources as a means of relieving the financial strains of the Civil War, opened new negotiations, but with indifferent results. A few friendly chiefs signed a new agreement at Fort Laramie, but others led by Red Cloud of the Sioux stalked out defiantly when Colonel Henry B. Carrington marched in with a battalion of the 18th Infantry, on his way to establish posts along the Bozeman Trail even before agreement with the Indians had been reached.

Although motivated by a sense of justice, treaty-making with the Indians more often than not constituted an exercise in futility for both parties. On the Indian side the tribes were loosely knit societies of individualists living a nomadic existence under leaders whose control and influence fluctuated with the fortunes of war. A treaty was no more binding than the degree of power, authority, and allegiance a leader might muster at any given time, Washington's understanding to the contrary. On the white side, although the authority of negotiating officials was unquestioned, the power to enforce treaty provisions on highly independent weltering whites was another thing, and as breach after breach provoked the red man to action the Army was invariably called in to protect the offending citizens and punish the Indians.

Colonel Carrington's battalion of about 700 men departed Fort Laramie in June 1866 for the Big Horn country. Despite Red Cloud's threat to oppose the move, several families, including the commanding officer's, accompanied the force. At Fort Reno on Powder River, some miles beyond the end of the telegraph, Carrington with a Regular company relieved two companies of the 5th U.S. Volunteers, former Confederate prisoners who became so-called galvanized Yankees when they agreed to frontier Indian service in exchange for their freedom. Farther northwestward, 225 miles from Fort Laramie, he selected a site on the Piney tributary of Powder River to construct his headquarters post -- Fort Phil Kearny. Five companies remained there while the remaining two were sent out to establish Fort C. F. Smith at the northern edge of the Big Horns.

Fort Phil Kearny became the focus of enemy attention and during its brief existence remained virtually in a state of siege. On December 21, 1866, the Indians attacked a wood train six miles from the fort.