During the rebellion of 1837, William Lyon Mackenzie and his followers, after losing at Montgomery's Tavern to Colonel FitzGibbon (who had won a victory over invading Americans at the Battle of Beaverdams during the War of 1812), narrowly escaped capture. They fled to the United States and regrouped on Navy Island in the Niagara River. Mackenzie's supporters on the Island numbered between 200 and 300 men, most of whom were Americans. To counteract this rebel threat, Colonel McNab and 2,500 Canadian militia took up a position on the Canadian mainland opposite Navy Island, where they encountered sporadic firing from across the river which was only 2000 feet wide at that point.
On December 1 of 1837, a Buffalo businessman, William Wells, purchased a 75 foot long steamship capable of transporting 45 tons. The name of this steamship was the Caroline. Wells was a sympathizer to the rebel cause and negotiated an agreement whereby the rebels could rent the ship to transport men and goods to Navy Island, although with keen foresight he made the rebels post a one thousand dollar bond for the safe return of his ship. Frozen into the Buffalo harbour, the ice had to be removed. Once this was accomplished, the Caroline sailed to Schlosser, near Navy Island, from which it delivered several loads of men and arms on December 28, 1837.
In order to transport food and supplies between the American mainland and Navy Island, the rebels had purchased an American steamboat called the Caroline. McNab believed that the boat was intended to facilitate Mackenzie's invasion of Canada, and therefore sent a small group of soldiers, under Captain Andrew Drew, a Royal Navy veteran who had twice been awarded a promotion for valour, to destroy the ship. At midnight on December 29, 1837, the Canadian soldiers crossed the river in small boats. When they did not find the ship at Navy Island, they continued to the American mainland where they found the Caroline moored near Fort Schlosser. When the attack came, it was a brief affair. Drew’s men surprised the crew and quickly overwhelmed them. Occupants of the ship were put ashore, the Caroline was towed into the current and set alight. Accounts abound of the Caroline being washed over the falls fully ablaze but most historical evidence indicates the ship actually broke up before going over the falls and only wreckage actually went over. Amos Durfee, found on the dock in Schlosser face up with a gunshot wound to the head, is the only person ever confirmed as bring killed in the attack. American reactions were swift. Local newspapers condemned the event as an attack upon the sovereignty of the United States and its citizens, in which dozens of people were killed or wounded. The fact that it was the parent nation, Great Britain, only made matters worse. Following the burning of the Caroline, the rebel forces at Navy Island were subjected to intense bombardment which forced them to abandon the Island for the American mainland.
Greatly exaggerated accounts of the burning of the Caroline were soon circulated in the United States and caused great resentment among Americans. Many believed that the seizing of the Caroline constituted a violation of American territory and called for retribution. It was feared that this situation would escalate into another war, but the governments of both countries were determined to maintain the peace. Therefore, after leading a series of raids against Canada in 1838 and 1839, Mackenzie was convicted of violating neutrality laws and imprisoned in 1839, after which the rebellion eventually died out.
While viewed as a necessary and successful operation in Britain and Canada, it was viewed as an act of war within the United States. Finally, in 1842, an agreement was reached between the United States and Britain. While Britain did not apologize for its actions, it apologized for not apologizing and explaining itself earlier.