While Madison was occupied with national affairs, there were several important events happening in his home state. In 1809-1810, a Literary Fund for Virginia was established as an aid to public education by providing money for school expenses. The state legislature under the direction of Governor John Tyler, Sr., provided that "all escheats (land the title to which was reclaimed by the state), confiscations, penalties and forfeitures, and all rights in personal property found derelict (deserted or abandoned) should be appropriated to the encouragement of learning." As time passed, this fund expanded considerably and was used to improve elementary education. Only the most proficient students were allowed to attend public secondary schools. The General Assembly encouraged the establishment of classical schools and academies via revenue secured from lotteries. In 1816, the Federal Government paid $1,210,550 to Virginia in return for a loan granted to the Federal Government by Virginia for the defraying of expenses incurred during the War of 1812. This payment was allotted to the Literary Fund.

From 1800 through 1816, the State of Virginia had four new counties formed: Tazewell (formed from Wythe and Russell Counties and named for Henry Tazewell, a United States Senator), Giles (created from Montgomery, Monroe and Tazewell Counties and named for William Branch Giles, a Congressman from Virginia who served four terms), Nelson (formed from Amherst County and named for General Thomas Nelson, military leader and Governor of Virginia in 1781), and Scott (formed from Lee, Russell and Washington Counties and named for General Winfield Scott, lawyer and military leader).

In 1811, Richmond suffered from a dreadful tragedy. Richmond had grown in approximately twenty-five years from a village to a thriving city. As the capital city of the state, it had become a center of wealth, social activities and entertainment. The leading actors and actresses of the country played at the Richmond Theater with pride. On the evening of December 26, 1811 as a play was in progress, the scenery at the back of the stage caught fire. When an actor shouted "The house is on fire!", chaos and confusion resulted. In addition to the flames which rapidly roared through the theater, the panic and hysteria contributed to the death of seventy-three individuals, including Governor George W. Smith and many other distinguished citizens. Gilbert Hunt, a slave, is credited with saving approximately twenty women and children by catching them as they were hurled to safety from flaming windows. The doors of this theater had been constructed in such a way that they only opened inwardly. Thus, when the audience madly rushed for an exit, numerous individuals were crushed since the doors could not be opened outwardly. As a result of this terrible tragedy, theater doors in Virginia and in other states were constructed in the future to open outwardly from the inside. A structure of stuccoed brick, known as Monumental Church, has been built by the architect, Robert Mills, upon the site of the old theater, and on a monument at the door is an inscription bearing the names of those who died in this incident.

In 1816, thirty-five western counties of Virginia held a convention at Staunton and demanded that the General Assembly be informed of their grievances and be asked to adjust same. After the War of 1812, the western counties believed that the State Constitution of 1776 was no longer appropriate and that the earlier counties, in spite of their longer political experiences, were greatly over-represented in proportion to their population as compared with the population of the western counties. One particular criticism was the representation plan of membership in the General Assembly. Although the white population was much greater in number west of the Blue Ridge than in the east, the western counties had only four delegates in the Assembly in comparison to thirteen delegates from the east. Therefore, these convention delegates demanded a revised or new state constitution which would include fair treatment, in their opinion, for the western counties of Virginia. The Staunton convention of 1816 caused other residents of Virginia, especially the politicians, to realize that this mountainous area was increasing in population and in interest in state and in national affairs and that it expected a similar increase in power and in influence in the state government of Virginia.

In 1817, James Monroe was inaugurated the Fifth President of the United States. A native of Westmoreland County, Monroe had had considerable political and diplomatic experience before becoming President. He had been a practicing lawyer in Fredericksburg, a Revolutionary War participant who had been wounded in the Battle of Trenton, New Jersey, a delegate to the Virginia Constitutional Convention at Williamsburg, a member of the Virginia General Assembly, a United States Senator, an American envoy to France, a Governor of Virginia, a United States Minister to France where he helped negotiate the Louisiana Purchase, a United States Minister to Spain, a United States Secretary of State and a United States Secretary of War under President Madison. His two presidential terms are often referred to as the "Era of Good Feeling" because wars and international disputes were unknown in this period.

Foreign policy was a highlight of Monroe's two years. A treaty with Spain in 1819 transferred East Florida to the United States, included an official admission that West Florida rightfully belonged to the United States, provided that the United States would assume and pay claims of citizens of the United States against the Spanish government amounting to five million dollars and defined the boundary of the Louisiana Purchase. Another incident taking place in this general area of the United States was the permission granted by the government of Mexico to Stephen Fuller Austin, a native of Austinville, Virginia, to establish a settlement for colonization on a land grant in Texas. He became the leader of the section and participated in so many happenings in the history of Texas that later, the capital, Austin, was named in his honor.

While Monroe was President, Congress had a difficult situation to face. Missouri applied for admission to the Union in 1819. Since there were eleven free and eleven slave states in the Union at this time, there was equal representation in the Senate from the North and from the South. However, the North had increased much more rapidly in population than had the South with the result that there were 105 Northern representatives in the House of Representatives and only 81 Southern representatives in the same body. Therefore, the South did not want any additional free states admitted to the Union at this time to upset the equal balance in the Senate. Consequently, a bill which had been proposed to admit Missouri to the Union with the understanding that slavery was to be abolished there directly upon such admission failed to pass in the Senate. In the same year, Maine, a free state, applied for statehood. Slavery had become a significant sectional issue by 1819 and Henry Clay, a native of Hanover County, proposed the now-famous Missouri Compromise of 1820: Maine was to be admitted as a free state, Misouri as a slave state; slavery was to be forever excluded in the rest of the Louisiana Purchase Territory north of the parallel of 36´ 30´´ (southern boundary of Missouri). Although Henry Clay, later known as the "Great Pacificator" or "Peacemaker" because of his ability to make compromises in difficult situations, moved to Kentucky in his "twenties," he studied law with the famous Virginia lawyer, George Wythe, and acquired many of his political beliefs in Virginia. President Monroe signed the Missouri Compromise expressing his approval of this bill.

A new trend in foreign policy was formulated by President Monroe, with the help of his Secretary of State, John Quincy Adams, in his annual message to Congress on December 2, 1823. The Monroe Doctrine, as it was later termed, stated that there was to be no further European colonization in the Western Hemisphere, that no European nation was to interfere in the government of any nation in the Western Hemisphere and that violation of either of the previous principles would be considered unfriendly to the government of the United States. In return, the government of the United States would not interfere in the governments of Europe.

From the time of the Revolutionary War, societies opposed to slavery were organized in the United States. Religious and non-religious groups favored the emancipation of the slaves, but the greatest problem facing those who favored freedom for the slaves was the finding of a suitable environment for the freed, uneducated Negroes. The South which had the greatest number of Negroes would have favored emancipation much more readily if this problem could have been solved satisfactorily. Washington and Jefferson both opposed slavery and Washington in his will provided for the freeing of his slaves upon the death of his wife. Jefferson proposed that the Negroes be freed and then sent out of the United States. Monroe likewise strongly opposed slavery and suggested that the Negroes be allowed to settle in an independent country of their own.