When gold was discovered in the Yukon in 1896, the news quickly prompted a stampede to Dawson City and points along the Klondike River. The Dominion government was faced with the threat of lawlessness, famine, and social unrest as steamboats brought thousands of prospectors to Alaska from the ports of San Francisco, Seattle, and Vancouver. Then they had to make their way across the notorious Chilkoot Pass to reach the Yukon goldfields. Many were ill prepared for this journey on which travellers were prey to robbers and con artists, among other hazards. The Canadian government desired to establish a police presence in the North, so Sam Steele was sent to Lake Bennett, where he set up his headquarters.
Steele and his men were kept busy administering the laws of Canada, as well as arranging supplies and transport, offering medical care, supervising marine traffic, collecting duties and fines, and providing mail service. Steele patrolled the tent city relentlessly, to avert trouble, settle disputes, and keep the peace.
As a reward for his success, Steele was promoted to Lieutenant Colonel in 1898 with full command of the Mounted Police in the Yukon. He moved to Dawson City and expanded the force and improved the facilities. Steele confronted serious problems policing a city with nearly 14,000 residents, many of them suffering from typhoid, scurvy, and other serious ailments. He established sanitation services and the digging of drainage ditches to prevent further typhoid outbreaks. Fines extracted from lawbreakers were used to pay for these community services. The citizens of Dawson were thus sorry to see Steele leave in the fall of 1899, but understood that after almost two years of separation, he was eager to join his wife and children in Montreal.