However, when Lincoln County was formed in 1869, and the fledgling settlement became the new County Seat, the town’s name was changed to Lincoln.

Before long the county and the town were populated by a number of cattle barons and cowboys, in addition to the Spanish settlers.  In the early 1870's two men, by the names of Lawrence Murphy and James Dolan owned the only store in Lincoln County, the largest county in the nation, covering 1/5 of New Mexico territory. The pair not only owned Murphy & Dolan Mercantile and Banking, they also owned large cattle ranches, and having influential territorial ties to officials in Santa Fe, the merchants were able to obtain several lucrative contracts with the military at Fort Stanton.

Before long, the two men monopolized the trade of the county, controlling pricing, making immense profits on their goods, and virtually having a hand in nearly every part of the economy of the large county. The merchants, along with their allies, who included local law enforcement, were familiarly known as "The House.”

For obvious reasons, Murphy and his allies were disliked by the small farmers in Lincoln County, as they were forced to pay high costs for their goods, while at the same time, accepting low prices for their cattle.

When a rival store was set up in 1876 by Alexander McSween and John Tunstall called H.H. Tunstall & Company near the one owned by Dolan and Murphy, it soon spawned what became known as the Lincoln County War. The feud between the two factions for political and economic control of the area would last for the next two years, fought sometimes in courtrooms, but more often through cattle rustling, gunfights, and murder. The feud came to a head when John Tunstall was murdered on February 18, 1878. Battling on the side of Tunstall and Company, referred to as the "Regulators,” was none other than Billy the Kid, who had been employed by Tunstall as a ranch-hand.

The feud became an all-out "war” as Tunstall's employees swore to avenge their boss’s murder, and began to retaliate against the "House.” The Lincoln County War came to a climax in July 1878 in a five-day battle when the Regulators holed up in McSween's house and the Ellis Store.  Soon, they were besieged by the Dolan faction in a battle that wouldn’t end until the arrival of U.S. Troops. When the smoke had cleared, five Regulators, including Alexander McSween, had been killed and several wounded. Of the Dolan faction, one man was killed and several wounded.  The "House” declared a victory as the Regulators fled the area. The famous battle made Billy the Kid not only a house-hold name, but also a fugitive.