Seeing how popular the National Reserve system had been under the Bear Flag Party, President Robert Waterman sought to expand the system, expanding the system to cover vast swathes of the nation, from the northern redwood forests to the high mountains of the Sierra Nevada to the deserts of Deseret. After the expansion was complete, there was a total of 15 National Reserves, covering hundreds of thousands of square kilometers of land. Of note was the Yosemite National Reserve, called the "Jewel in the Crown" of California. The reserve was made popular by the works of John Muir, an immigrant from Scotland who spent many years living in Yosemite Valley and producing photographs and poems that were published all over California, as well as in the world.

In 1877, President Waterman suddenly suffered a stroke, rendering the left side of his body paralysed. After the incident, Waterman spent the rest of his term in the Executive Mansion, often called the "Gold House" for its bright ochre paint as well as California's history with gold. During that time, there was a brief period of time when the First Lady of California, Jane Waterman, served as the intermediary of the President. It was well noted that the First Lady often determined which issues were more pressing for the President, and controlled which ones got to his desk. As the President would more often than not just sign the bills that got to him, many joked that Jane Waterman had become the "Interim President" of California.

Owing to the term limits of California, President Waterman was able to retire peacefully, and a closely contested saw Senator Adam Cumberland of Bear Flag elected the 8th President of California. Seeking to improve his popularity, President Cumberland sent envoys to Mexico to negotiate the purchase of the Baja California Peninsula. The Mexican president, Porfirio Diaz, was eager to keep good relations with California, as he had in his previous Presidency. The year before, however, Diaz had enacted a coup against the Mexican government, and had seized total control as President. His rule as a dictator brought criticism to President Cumberland, who was seen as negotiating with an oppressor. It especially brought the ire of the Hispanic Californian population, who lead demonstrations in San Diego, Los Angeles, and Phoenix against negotiating with Diaz. In many cases, the protestors were put down by the "Haldemans", a private security force often employed by men in the Bear Flag party. The Haldemans were also often used to put down strikes in factory towns such as Redwood, Stockton, and Concord.

Regardless of the protests, the treaty went through, and the Senate voted to approve the purchase of Baja California. The territory was soon formed into the Territory of Baja California. President Cumberland spoke proudly of the purchase in a speech in 1879, saying "After many years, Alta and Baja California are unified once again." With no real towns to speak of in the largely desert region, the government of California gave approval for the incorporation of a town not far from San Diego that was named "Mexicali", as a portmanteau of "Mexico" and "California". However, with all the controversy that had already come about, even more came when white settlers and immigrants began to pour into the territory, in some cases displacing the Mexicans who already lived there. After protests managed to bring construction on the town of Mexicali to a halt, President Cumberland was forced to negotiate a settlement of paternal ownership, in which those who already lived in Baja California would be granted the right to remain on their land and not get kicked out.

However, as more white settlers and immigrants came to California, the Mexicans who were already there were corralled away from the main Anglo cities into barrios just like in cities like Los Angeles or San Francisco. In fact, as time wore on, the states of Mojave and Arizona as well as the territory of Baja California had begun to implement a series of legal segregations against Hispanic-Californians that were collectively called Separación, from the Spanish word for separation. These laws were mostly entrenched in the southern regions of California, where the majority of Spanish immigrants and citizens lived. For the next few decades, these codes were the law of the land. Especially moreso after the California Supreme Court case Estévez v Mojave ruled that the laws were legal so long as the barrios received the same services that the remainder of the city received. For decades, the same phrase was repeated in the justification of Separación: separate, but equal.

At the start of 1880, California had become a major agricultural nation, with towns such as Merced, Fresno, and Stanislaus growing up and down the San Joaquin Valley with the rise of improved irrigation techniques. In the case of these three cities, however, the drive came from the California Pacific Railroad's new Valley Line. Every so often, the company had started selling off plots of land that it owned around its tracks, and this drove the growth of towns. The same pattern was being repeated in the desert, with small mining towns growing up around railroad lines that connected them to civilization and allowed them to grow. One very odd town in the state of Mojave was the city of Salaam, a town that had become the only Muslim-majority town in California, seated right along the banks of the Rio Grande near the border with Mexico.

The election of 1884 was a fairly calm election, between Bear Flag candidate Andrew Folsom and Freedom candidate Silas Welch. Welch's campaign was centered around easing off relations with the Diaz regime in Mexico and moving towards friendly relations with the Confederate States of America and the United States of America, who had evolved from being bitter enemies to becoming neighbors who at least tolerated each other. Folsom advocated keeping relations friendly with Mexico, stating that their traditional friendship should be maintained. In the end, it came down to a matter of a few thousand votes in the state of Shasta, which threw their support for Welch and elected him to be the 9th President of California. His administration immediately began seeking friendly relations with both of the Americas, especially with the completion of the two Transcontinental Railroads. A Californian now had two options to travel east: they could board a train in Redwood and travel east through the mountains and the plains to arrive in New York City, or they could board a train in Los Angeles and travel east through the desert and the prairie to Savannah. The erection of telegraph cables across the country soon brought the nation closer together. Distances were shrinking fast across the world.

In December of 1885, however, President Welch was assassinated by a Hispanic man who felt that his administration was doing nothing to end Separación, and Vice President Booker Minett was sworn in as the 10th President of California. Minett had not expected to be President, but quickly took action against the Hispanic-Californians, seeking revenge for Welch's assassination. In many Hispanic neighborhoods across California, martial law was implemented until they could find the people responsible. This lasted for several months, and yielded no results, ultimately just reverting back to the previous status quo.