The most rapid period of settlement in Minnesota was during the 1880s, when homesteaders rushed into the western and southwestern regions of the state. In the same period, lumbering was at its peak, and flour milling, using power provided by the Falls of St. Anthony, was becoming important. Both Minneapolis, as the lumber, milling, and retail centre, and its neighbouring city of St. Paul, as the transportation, wholesaling, finance, and government centre, tripled in population during the 1880s. The rivalry between the two cities became particularly intense after the census of 1880, when Minneapolis surpassed St. Paul in population. By the end of the century, Minneapolis had developed a strong industrial base, while St. Paul’s economy had stagnated.

Commercial iron ore production began in Minnesota in 1884 at Soudan, on the Vermilion Range. After the huge iron reserves of the Mesabi Range were discovered at Mountain Iron in 1890, large-scale production began, and the population along the Mesabi Range and in the Lake Superior port cities of Duluth and Superior, Wis., grew rapidly during the next two decades. The state’s deposits of high-grade iron ore were virtually depleted by the late 1950s. To encourage the mining of taconite, a low-grade ore that was plentiful in the state but previously viewed as “waste rock,” the Minnesota legislature enacted a taconite production tax in 1941 that would tax miners on the amount of ore that was produced from the low-grade deposits. (The taconite tax was in lieu of the high property and ad valorem taxes, which were in place then for the extraction of iron ore.) Later, in 1964, a constitutional amendment was passed that guaranteed the taconite industry a tax-free period of 25 years. The opening of the St. Lawrence Seaway in 1959 connected the port of Duluth to the Atlantic Ocean, allowing the shipment of iron ore, coal, and grain to other parts of the country and to Canada. In 1984 the last shipment of high-grade iron ore was dispatched from the Mesabi Range, and the preeminence of taconite mining was unquestionable.

Most of the valuable pine, balsam, and spruce in central and northeastern Minnesota had been cut before 1900, after which time the lumbering industry declined rapidly. Wood products remained important in northern and northeastern Minnesota, however.

After World War I Minnesota, like other states, experienced drought and a rural depression. The growing mechanization of agriculture resulted in the loss of farm jobs, and, as a result, rural populations in the state declined after 1920. Moreover, an influenza epidemic killed more than 10,000 Minnesotans from 1918 to 1920. During this time a new political party, the Farmer–Labour Party, was formed to represent the common cause of farmers battling plummeting crop prices and facing foreclosure and of urban workers who were denied fair wages and the right to organize; it became one of the largest political parties in the state. The Democratic and Farmer–Labour parties merged to form the Democratic–Farmer–Labour (DFL) Party in 1944. Among the party’s influential liberal leaders were Hubert H. Humphrey, Eugene J. McCarthy, and Walter F. Mondale, all of whom went on to serve in the U.S. Senate.

Since the 1940s Minnesota has been a leader in the advocacy of civil rights and the prevention of racial discrimination. During Humphrey’s term as mayor of Minneapolis, he established a local human relations council and passed fair employment legislation. Indeed, Humphrey gave an impassioned plea at the 1948 Democratic National Convention in favour of a civil rights plank in the party’s platform—he implored that “the time has arrived in America for the Democratic Party to get out of the shadow of states’ rights and walk forthrightly into the bright sunshine of human rights”—the successful adoption of which prompted some Southern Democrats to leave the party and form the Dixiecrats. Moreover, the American Indian Movement was founded in Minneapolis in 1968 to protect the rights of Native Americans.

By the mid-20th century, Minnesotans increasingly sought employment opportunities in urban centres, particularly the Twin Cities. The parochial rivalry between St. Paul and Minneapolis had mellowed, as the economic times no longer fueled competition (though in the early 21st century, the cities remained culturally distinctive). Although the growth of the Twin Cities mirrored the urbanization trend of the United States as a whole, the cities—and the rest of Minnesota—remained culturally, economically, and politically separate from the rest of the country well into the 1960s. Indeed, throughout much of the 20th century, Minnesota was seen by outsiders as unusually liberal on economic matters yet culturally conservative, with the traditional sentiments of its dominant populations (mainly European Americans) holding sway. Few domestic labourers were attracted to Minnesota. Migrants from the South, for example, found employment opportunities in St. Louis, Cincinnati, Chicago, or Detroit before reaching the Twin Cities area. The same was true for immigrants, for whom Minnesota seemed about as remote a destination as one could locate on the map of North America.

After 1970, however, Minnesota became more tightly linked with the rest of the country. National and international investment in prominent local companies became common. Business and political leadership, once entirely homegrown, expanded. Local populations, once almost exclusively descended from settlement waves of the 19th century, came to include increasing numbers of Hispanics (mainly from Mexico and Texas) and African Americans (from the South and from Midwestern Rust Belt cities), as well as Southeast Asian and African immigrants.

By the early 21st century the Twin Cities were vastly outpopulated by their suburbs, which continued to expand with new residential areas, retail strip malls, and big-box retail stores. The approach to the environment, however, shifted from one of exploitation to more skillful management of Minnesota’s natural resources. The state’s remaining wilderness areas (including the large Boundary Waters Canoe Area in northeastern Minnesota) came under government protection. With their tradition of political activism, Minnesotans continued to influence those living conditions that they could and to adapt creatively to those they could not.

The state drew national attention in 2008–09 when the results of the November 4, 2008, election for a U.S. Senate seat were disputed. The initial count showed that the incumbent Republican senator Norm Coleman had defeated DFL candidate Al Franken by just 215 votes. The narrow differential prompted a mandatory recount, by which it was determined in January 2009 that Franken had actually won the race by 225 votes. Coleman challenged the recount in a lawsuit, but in April the three-judge panel that heard the case declared Franken the winner. The panel also stipulated that a number of previously rejected ballots should be counted; those ballots gave Franken a victory margin of 312 votes. Coleman then appealed to the Minnesota Supreme Court. Meanwhile, because Coleman’s term had expired in January, the Senate seat remained vacant. In June 2009 the Minnesota Supreme Court ruled unanimously that Franken had won the race, and Coleman conceded.

Minnesota was again the centre of attention in 2011, when the Republican-led legislature and the DFL governor were unable to agree on how to tackle deficits in the state’s budget for the next year. The standoff led to the start of the new fiscal year without a budget in place, and, as a result, state government operations were largely shut down on July 1. Most state offices were closed, as were state-operated recreation areas, and state projects, such as road construction and other infrastructure repair, were halted. Services considered to be essential, such as those in the areas of law enforcement, health, and education, continued. A compromise was eventually reached, and on July 20 the shutdown ended when legislators passed the necessary budget bills, which the governor then signed. The shutdown earned the distinction of being the longest in Minnesota’s history and the longest state-government shutdown of the past decade in the country.

The nationwide debate over same-sex marriage came to the fore in Minnesota in the 2010s, with much of the state’s politically active population lining up on opposite sides of the issue. Minnesota already had legal measures in place that banned same-sex marriage, but in 2011 the Republican-led legislature attempted to strengthen the ban by voting to hold a referendum on a proposed state constitutional amendment that would define marriage as being between one man and one woman; this stirred up an emotional debate and galvanized supporters on both sides of the issue. The proposed amendment was put to referendum in November 2012 and was defeated by the voters, 52 percent to 47 percent. Buoyed by their momentum, those who opposed the amendment now turned their attention toward actively campaigning for the legalization of same-sex marriage. In May 2013 Minnesota’s legislature—now led by the DFL—passed a bill legalizing same-sex marriage. It was then signed into law by the governor and was scheduled to take effect in August.