Newell’s first wife died in 1845 and was buried at Champoeg. Her gravesite is accessible to visitors at the current Champoeg State Heritage Area. He remarried in 1846 to Rebecca Newman. After the Whitman Massacre and during the ensuing Cayuse War, he was appointed as a peace commissioner. In that role, on March 7, 1848, he negotiated to keep the Nez Perce tribe out of the war. Newell was then appointed as Indian agent for the tribes located south of the Columbia River in the Oregon Territory before moving to California to mine during the California Gold Rush in 1849. In 1850, he returned to Oregon where he platted the Champoeg townsite with Andre Longtain. From 1855 to 1856 he was the commander of a company of army scouts during the Rogue River Wars. In 1860, Newell was elected to the Oregon House of Representatives after Oregon achieved statehood in 1859. He served as a Democrat representing Marion County. Most of Champoeg was wiped away during an 1861 flood, although Newell's house, situated on high ground, was one of the few to survive. Newell almost bankrupted himself taking in victims of the flood.