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By the late summer of 1837, supporters of the English party in Montreal had created a para-military secret society called the Doric Club. Papineau's adherents followed suit by organizing Les Fils de Liberte Riots broke out in Montreal and the government lost control of the countryside in the Richelieu Valley and the Lake of Two Mountains. In late November and early December government forces moved against the chief centres of insurrection, crushing armed resistance. It would be foolish to deny the cultural conflict involved, but the rivals sought to conceal it. In the Richelieu Valley, the insurgents at St. Denis were commanded by Wolfred Nelson, an English-Canadian of Loyalist descent. The Montreal Rifles who marched with the government forces to St. Eustache were led by Pierre-Edouard Laclere They were suppressing a rebellion that excited more sympathy than support as its success could only have led to annexation to the United States.

In Upper Canada it was very different. There, in the early 1830s, the majority in the Assembly wavered between government supporters and reformers. William Lyon Mackenzie, the best journalist in the province, offered a mixture of British radicalism and Jacksonian democracy which could easily be mistaken for republicanism. His program of agrarian democracy rallied newer American settlers to the cause of reform, but alienated Irish immigrants, both Orange and Green and, by 1836, had even divided the reformers. In an election held that year the Lieutenant Governor, Sir Francis Bond Head, appealed to the electorate to return "loyal" candidates. The result was a majority in the Assembly opposed to responsible government.

So confident was the Lieutenant Governor of popular support that he overplayed his hand by sending the regulars out of the province to help suppress the rebellion in Lower Canada. This gave Mackenzie an opportunity to gather a few hundred supporters in an attempt to seize Toronto by a coup d'état. As his followers had come prepared for an armed demonstration rather than a fight, they melted away when faced with resistance. Yet Mackenzie's effort at coup d'etat has placed his name beside Papineau's in Canadian folklore. After a brief period of exile, both returned, unrepentant, to take their place in Canadian politics as back-benchers in the Assembly, a privilege not extended to United Empire Loyalists or former Confederate leaders in the republic to the south of Canada.

The end result of the rebellions of 1837–38 was the Durham Report. It reflected the thinking of contemporary British radicals, men like Charles Buller, who helped write the report. They were good at constructing systems and understood facts and figures; hence their far-sighted recommendation of the union of Upper and Lower Canada, combined with responsible government and a federation of all the British American provinces. Unfortunately, their calculations lacked a cultural dimension and the report included a gratuitous prophecy of the inevitable assimilation of French Canada. Consequently, the report, in spite of its wisdom, was a political disaster which gave the Act of Union the appearance of a conspiracy to assimilate French Canada into an English melting pot.

Yet there was among the younger French Canadians a rising politician—Louis-Hippolyte La Fontaine—with statesmanlike vision. He understood clearly that the French Canadians would vote en bloc and that English Canadians were permanently divided. It followed that the French Canadians would be senior partners under the Act of Union, and so it was. La Fontaine's views were not accepted immediately by the church or by moderate French Canadian leaders who had opposed the rebellions. Papineau, who returned to Canada in the mid-1840s, gathered around him a small group of young men, the Parti Rouge, who ridiculed responsible government and advocated union with the United States.

By degrees, La Fontaine's view prevailed. French-Canadian opposition to the Union softened when La Fontaine, who had been prevented from winning a seat in the Assembly by electoral violence, was offered a safe seat in Upper Canada by Robert Baldwin. By 1843 the Governor, Sir Charles Bagot, realized that he could not govern without French-Canadian support and, on La Fontaine's insistence, accepted both La Fontaine and Baldwin on the Executive Council.

The question of who exercised power was less important than how it was used. In the 40s the Tories and reformers were equally committed to developing the St. Lawrence canal system. Until the repeal of the Corn Laws in 1846, there was still hope that the Canadian route to the English market would be competitive with the Hudson-Mohawk system. When the Canadian canal system was completed in 1849, it was discovered that it was cheaper to ship wheat from the Lakehead to Quebec City than to New York. However, the cost of pilotage beyond Quebec and increased insurance rates cancelled out the advantage.

Thus, by 1849 Canada seemed to have reached a dead end. The St. Lawrence system had suffered defeat. Famine migration from Ireland in the mid-40s brought tragedy and increased poverty. Politically, the reformers finally achieved full responsible government in 1849 with the turbulent passage of an Act compensating those whose property had been destroyed during the rebellions. As families of rebels profited from the Act, the English party, in a fit of fury, burned down the parliament building. In one sense, the Rebellion Losses Act was wise as it helped reconcile former rebels. However, Montreal lost its prestige as capital. Henceforth the seat of government alternated between Quebec City and Toronto.

The burning of the parliament building was accompanied by another act of despair on the part of the English party in Montreal. This was the "Annexation Manifesto", which called for union with the United States. A few French Canadians, including Papineau, signed the Manifesto, but the French community, which rallied to the Governor, Lord Elgin, decisively rejected annexation. French Canada did not care to become a "Louisiana of the North".

Meanwhile, the response of the government was to seek reciprocity with the United States, hoping to secure the economic advantages of union without being incorporated into the republican system. Reciprocity took time to negotiate and seemed less urgent as the economy recovered in the mid-1850s. The secret of economic recovery was railway building and railway finance. Again, there was close collaboration between reformers and Tories, so much so that Sir Allan MacNab, the leader of the Tory opposition, was president of the Great Western Railway which could not flourish without government support. With the outbreak of the Crimean War in 1854, there was a seller's market in wheat which ensured a great, if temporary, prosperity for Canada.