Unlike some Indian agents of the later 19th century, McLaughlin genuinely liked and respected his charges. His wife was half Sioux, and she taught her husband to speak her native language reasonably well. In 1871, this valuable skill won McLaughlin a position at the Devils Lake Indian Agency in Dakota Territory and he eventually became the chief agent.
At Devils Lake, McLaughlin gained a reputation for fair and sympathetic treatment of Indians. His appreciation for Indians was strictly limited, however. Like most Indian agents of the day, McLaughlin believed that his mission was to "civilize" the Indians by forcing them to adopt white ways. McLaughlin viewed traditional Indian practices like the Sun Dance and buffalo hunting as obstacles to the inevitable assimilation of the Native Americans into white society. Thus, while he worked hard to improve Indian living conditions, he simultaneously tried to stamp out their culture by promoting the use of English and the adoption of sedentary farming.
In 1881, McLaughlin was transferred to the larger Sioux reservation at Standing Rock, South Dakota. Two years later, the great Sioux Chief Sitting Bull was assigned to the reservation. McLaughlin worried about Sitting Bull. The chief was infamous for his role in the defeat of Custer's 7th Cavalry at the Battle of the Little Big Horn in 1876. He was also among the last of the Sioux to accept confinement to a reservation, and his disdain for white ways was well known.
For several years, McLaughlin and Sitting Bull enjoyed a strained but peaceful relationship. In 1890, however, a popular religious movement known as the Ghost Dance swept through the Standing Rock reservation. The Ghost Dancers believed that an apocalyptic day was approaching when all whites would be wiped out, the buffalo would return, and the Indians could return to their traditional ways.
McLaughlin wrongly suspected that Sitting Bull was a leader of the Ghost Dance movement. In December 1890, he ordered the arrest of the old chief, believing this might calm the tense situation on the reservation. Unfortunately, during the arrest, a fight broke out and McLaughlin's policemen killed Sitting Bull. The murder only exacerbated the climate of fear and mistrust, which contributed to the tragic massacre of 146 Indians by U.S. soldiers at Wounded Knee later that month.
In 1895, McLaughlin moved to Washington, D.C., where he became an inspector for the Bureau of Indian Affairs. He eventually became familiar with Indians all around the nation, leading him to write a 1910 memoir entitled, My Friend the Indian. He died in Washington in 1923 at the age of 81 and was buried at the South Dakota reservation town that bears his name.