W. Westfall next built a second cabin and opened a store and the town company also erected a building known as the old barracks, which became the second store. A hotel was also built by the company and was called the Santa Fe House. Dr. Simmons and Dr. Pierson were the first physicians, as they opened offices in Palmyra in 1856, at which time the town had a harness shop, a blacksmith, lawyer, drug store, a tavern, several stores, a good hotel for the period, and a number of dwellings. The Palmyra post office was established in 1856, with N. Blood as postmaster. Religious services were first held at residences by the Methodist Church in 1855. Before the Civil War, Baldwin City was situated in the midst of several events the Kansas-Missouri Border War, including the Battle of Black Jack about three miles east of Baldwin on June 2, 1856. 

In 1858, the town company purchased a section of land adjoining Palmyra on the north and donated it to the Kansas Educational Association of the Methodist Episcopal Church on the condition that they locate an college known as Baker University on the site. The section of land was surveyed into lots and sold, the proceeds being used to erect the college building. As the work on the university building progressed, a number of  houses were erected in the area, which soon became known as Baldwin, in honor of John Baldwin of Berea, Ohio, who was the primary benefactor of the college. Business buildings were also erected and one by one the business enterprises of Palmyra moved to Baldwin. That same year, the Methodist Church built a chapel that was used by the congregation. Baker University is the oldest oldest four-year college in the state of Kansas and four of its buildings are now listed on the National Register of Historic Places.

John Baldwin erected a saw and grist mill at the present-day site of Fifth and Indiana Streets, and inaugurated other commercial enterprises, which proved the death blows to the old town of Palmyra, which later was abandoned. The post office was moved and the name officially changed from Palmyra to Baldwin City on May 22, 1862.

In the midst of the Civil War, Quantrill's Raiders passed within three miles of Baldwin after the Lawrence Massacre in August, 1863.

In 1867, the Leavenworth, Lawrence and Fort Gibson Railroad laid tracks and became the first Kansas railroad south of the Kansas River. The city continued to grow and by the turn of the century it boasted a number of beautiful homes, churches, retail stores of all kinds, a fine public school, water and lighting systems, a money order post office, and a telegraph.

In 1906, the Santa Fe Depot was built and today is the only remaining depot of Kansas' first railroad south of the Kansas River. Today the Midland Railway offers excursion rides to Ottawa via "Nowhere" and Norwood. By 1910, Baldwin City boasted some 1,265 residents and had become one of the leading education centers of the state.