The U.S. Congress had appointed an Electoral Commission (five Senators, five Representatives, and five justices of the U. S. Supreme Court) on January 29, 1877, after months of controversy, which, by straight party vote (eight to seven), awards the disputed electoral votes to Republican candidate Hayes, thus making him President.

The Republican victory in the Electoral Commission is due to promises made to Southern Democrats that the remaining federal troops will be withdrawn from the South, Southern patronage will be shared with Democrats, and appropriations will be made for Southern economic improvements, and at least one Southerner will be appointed to the cabinet.

A series of sectional bargains known collectively as the Compromise of 1877, brokered in part by Thomas Alexander Scott, president of the Pennsylvania Railroad, ensures Hayes’s inauguration.

The compromise essentially states that Southern Democrats will acknowledge Hayes as president, but only on the understanding that Republicans will meet certain demands.

The following elements are generally said to be the points of the compromise:

1) The removal of all federal troops from the former Confederate States. (Troops remain in only Louisiana, South Carolina, and Florida, but the Compromise finalizes the process.)

2) The appointment of at least one Southern Democrat to Hayes's cabinet. (David M. Key of Tennessee becomes Postmaster General.)

3) The construction of another transcontinental railroad using the Texas and Pacific in the South (this had been part of the "Scott Plan," proposed by Thomas A. Scott, which had initiated the process that led to the final compromise).

4) Legislation to help industrialize the South and get them back on their feet after the terrible loss during the Civil War.

In exchange, Democrats will:
• Peacefully accept Hayes's presidency.
• Respect blacks' rights.

Democrats complain loudly that Tilden had been cheated.

There is talk of forming armed units that will march on Washington.

President Grant beefs up military security in response.

No one marches on Washington, and Hayes is peacefully inaugurated on March 2; points 1 and 2 do take effect.

As regards the first and most important point, Hayes had already announced his support for the restoration of "home rule", which involves troop removal, before the election.

It is also not unusual, nor unexpected, for a president, especially one so narrowly elected, to select a cabinet member favored by the other party.

As for points 3 and  4, if indeed there is any such firm agreement, they are never acted on.

In any case, whether by an informal deal or simply reassurances already in line with Hayes's announced plans, talks with Southern Democrats satisfy the worries of many and so prevent a Congressional filibuster that had threatened to extend resolution of the election dispute beyond Inauguration Day 1877.

Woodward (1951) argues for an economic interpretation, whereby railroad interest meeting secretly at the Wormley Hotel in Washington had forged a compromise with aid to Southern railroads as the sweetener. (Woodward, C. Vann (1951). Reunion and Reaction: The Compromise of 1877 and the End of Reconstruction. Oxford University Press.)

However, no serious effort will be made to fund a railroad or provide other federal aid.

An opposing interest group representing the Southern Pacific will successfully thwart Scott's Texas and Pacific scheme and ultimately run its own line to New Orleans.

Hayes’s inauguration marks, for practical purposes, the restoration of “home rule” for the South—i.e., that the North will no longer interfere in Southern elections to protect the blacks and that the Southern whites will again take control of their state governments.

Federal troops are withdrawn from South Carolina on April 10 following the Republican promise.

This leaves only Louisiana under Federal occupation, which is scheduled to end in two weeks.

The freed black citizen, whose vote represents the balance of power in Louisiana, becomes the pawn in the electoral struggle between the state's Democrats and Republicans after 1876.

Both Nicholls and Packard take the oath as governor in January 1877 and set up rival governments, which continue until President Hayes, elected as a part of a bargain, orders the withdrawal of federal troops from the capital on April 20, 1877, and the white Democratic Party is left in control.

The withdrawal, on April 24 of Federal troops from Louisiana ends “Black Reconstruction” or “carpetbag rule” by Radical Republicans in the South. (Henceforth, Southern whites, in full control of their states, proceed systematically to nullify in practice Negro civil rights as guaranteed in the Fourteenth and Fifteenth amendments. This successful nullification will last well past the mid-twentieth century, despite continuous struggles against it.)

A bitter antagonism between workers and the leaders of industry had developed in the wake of the Panic of 1873.

By 1877, ten per cent wage cuts, distrust of capitalists and poor working conditions lead to a number of railroad strikes that prevents the trains from moving.

The Great Railroad Strike of 1877 starts on July 14 in Martinsburg, West Virginia, in response to the cutting of wages for the second time in a year by the Baltimore & Ohio Railroad (B&O).

Striking workers will not allow any of the stock to roll until this second wage cut is revoked.

The governor sends in state militia units to restore train service, but the soldiers refuse to use force against the strikers and the governor calls for federal troops.

The railroad strike meanwhile spreads to Cumberland, Maryland, stopping freight and passenger traffic.

When Governor John Carroll of Maryland directs the 5th and 6th Regiments of the National Guard to put down the strike, ...

...the militia attacks and kills citizens from Baltimore, which results in the strikers and onlookers to retaliate, attacking the troops in turn as they march from their armories towards B&O's Camden Station for the train to Cumberland, causing violent street battles between the striking workers and the Maryland militia.

When the outnumbered troops of the 6th Regiment fire on an attacking crowd, they kill ten and wound twenty-five.

The rioters injures several members of the militia, damage engines and train cars, and burn portions of the train station.

On July 21–22, the President sends federal troops and Marines to Baltimore to restore order.

Pittsburgh, Pennsylvania becomes the site of the worst violence.

Thomas Alexander Scott of the Pennsylvania Railroad, often considered one of the first robber barons, suggests that the strikers should be given "a rifle diet for a few days and see how they like that kind of bread."

However, local law enforcement officers refuse to fire on the strikers.

Nonetheless, his request comes to pass on July 21, when militiamen bayonet and fire on rock-throwing strikers, killing twenty people and wounding twenty-nine others.

Rather than quell the uprising however, this action merely infuriates the strikers, who then force the militiamen to take refuge in a railroad roundhouse, and then set fires that raze thirty-nine buildings and destroy one hundred and four locomotives and twelve hundred and forty-five freight and passenger cars.

On July 22, the militiamen mount an assault on the strikers, shooting their way out of the roundhouse and killing twenty more people on their way out of the city.

Philadelphia strikers, three hundred miles to the east, battle local militia and set fire to much of Center City before federal troops intervene and put down the uprising.

Pennsylvania's third major industrial city at this time, Reading, whose forty thousand citizens lie tightly but restively in the economic grip of Franklin B. Gowen, is also hit by the Strike's fury.

The city's commercial pace depends heavily on the movement of Gowen's Philadelphia and Reading Railroad and the activity of Gowen's Philadelphia and Reading Coal and Iron Company.

The railroad alone employs some fifteen hundred in the city.

On the surface, Reading appears an unlikely place for industrial unrest.

Ninety percent of the residents are native born and almost all the rest are German.

This city is home of the engine works and shops of its namesake Reading Railroad, against which engineers had already been on strike since April 1877.

Sixteen citizens are shot by state militia in the Reading Railroad Massacre.

Preludes to the massacre include: fresh work stoppage all classes of the railroad's local workforce; mass marches; blocking of rail traffic; trainyard arson; and the burning down of the bridge providing this railroad's only link to the west—to prevent local militia from being mustered to Harrisburg or Pittsburgh.

The militia responsible for the shootings had been mobilized by Reading Railroad management, not by local public officials.