Tensions had been running high on Pine Ridge Reservation in South Dakota for months because of the growing popularity of a new Indian spiritual movement known as the Ghost Dance. Many of the Sioux at Pine Ridge had only recently been confined to reservations after long years of resistance, and they were deeply disheartened by the poor living conditions and deadening tedium of reservation life. The Ghost Dance movement taught that the Indians were defeated and confined to reservations because they had angered the gods by abandoning their traditional ways. If they practiced the Ghost Dance ritual and rejected white ways, many Sioux believed the gods would create the world anew, destroy the unbelievers, and bring back murdered Indians and the giant herds of bison.
By late 1890, Pine Ridge Indian agent James McLaughlin was alarmed by the movement's increasing influence and its prediction that all non-believers—presumably including whites—would be wiped out. McLaughlin telegraphed a warning to Washington, D.C. that: "Indians are dancing in the snow and are wild and crazy. We need protection now." While waiting for the cavalry to arrive, McLaughlin attempted to arrest Sitting Bull, the famous Sioux chief, who he mistakenly believed was a Ghost Dance supporter. U.S. authorities killed Sitting Bull during the arrest, increasing the tensions at Pine Ridge rather than defusing them.
On December 29, the 7th Cavalry under Colonel James Forsyth surrounded a band of Ghost Dancers under the Sioux Chief Big Foot near Wounded Knee Creek and demanded they surrender their weapons. Big Foot and his followers had no intentions of attacking anyone, but they were distrustful of the army and feared they would be attacked if they relinquished their guns. Nonetheless, the Sioux agreed to surrender and began turning over their guns. As that was happening, a scuffle broke out between an Indian and a soldier, and a shot was fired. Though no one is certain which side fired it, the ensuing melee was quick and brutal. Without arms and outnumbered, the Sioux were reduced to hand-to-hand fighting with knives, and they were cut down in a withering rain of bullets, many coming from the army's rapid-fire repeating Hotchkiss guns. By the time the soldiers withdrew, 146 Indians were dead (including 44 women and 18 children) and 51 wounded. The 7th Cavalry had 25 dead and 39 wounded.
Although sometimes referred to as a battle, the conflict at Wounded Knee is best seen as a tragic and avoidable massacre. Surrounded by heavily armed troops, it is highly unlikely that Big Foot's band would have deliberately sought a confrontation. Some historians speculate that the soldiers of Custer's old 7th Cavalry were deliberately taking revenge for the regiment's defeat at Little Bighorn in 1876. Whatever the motives, the army's massacre ended the Ghost Dance movement and was the final major confrontation in America's deadly war against the Plains Indians.