Gallatin plunged into business and public life after emigrating to the New World at age 19. Settling in Pennsylvania, he became a mainstay of the Anti-Federalists (and, later, the Jeffersonian Republicans) in that area and in 1795 was elected to the House of Representatives. There he inaugurated the House Committee on Finance, which later grew into the powerful Ways and Means Committee. In 1797–98 he helped to reduce Federalist-sponsored expenditures aimed at promoting hostilities with France. He was bitterly denounced by Federalists in Congress, and, when the Alien and Sedition Acts were passed in 1798, Thomas Jefferson believed they were partly intended to drive Gallatin from office.

As secretary of the Treasury, Gallatin stressed simplicity in government and termination of the public debt. Despite heavy naval expenditures and the $15,000,000 Louisiana Purchase (1803), he managed to reduce the public debt by $23,000,000 within eight years.

The declaration of war with Great Britain in 1812 shattered all of Gallatin's most cherished schemes, for he felt war to be fatal to the nation's prosperity and progress. He therefore put the nation's finances in the best order he could and set himself to attain an early peace. Grasping at Russia's proffered mediation of the war, he sailed for Europe in May 1813. Refusing to deal through Russia, Great Britain expressed its willingness to proceed with direct negotiations, and commissioners from the two countries finally met at Ghent in August 1814. In the tedious discussions that followed, Gallatin played the leading role, preserving peace among his colleagues and establishing an enviable reputation as a diplomat. Peace was signed in the Treaty of Ghent (December 24).

While still in Europe, Gallatin was appointed minister to France (served 1816–23), after which he returned to the United States, only to be embroiled in a bitter intraparty political struggle. After serving briefly as minister to Great Britain (1826–27), he retired from public life and became president of the National (later the Gallatin) Bank in New York City (1831–39). A student of the Indian tribes in North America, he founded the American Ethnological Society of New York (1842) and has sometimes been called the “father of American ethnology (cultural anthropology).”

(For Gallatin's opinion of the Mexican-American War (1846–48), see primary source document: The Unjust War with Mexico. (Unjust War with Mexico))