During the winter of 1890–1891, Colby and his command were called into active service on the occasion of the uprising of the Sioux Indians of Pine Ridge and other agencies in South Dakota and Nebraska. The command took part with great credit in the engagement at Wounded Knee and many skirmishes along the borders of the Badlands, where the hostile forces were located, and won the congratulations of Major General Nelson A. Miles, who complimented Colby on his successful management of the Nebraska troops. On his return home, Colby was presented with a gold medal for "gallant and efficient services rendered the state of Nebraska." The fourth day after the battle of Wounded Knee, when the detail went out to bury the dead, a Lakota baby girl, about four months old, was found on the battlefield, tied, in the usual fashion, on her dead mother's back, and found under a covering of snow. Her head, hands, and feet were frozen in the severe storm that followed the battle, but she fully recovered. The child was taken by Colby to his home, was given the name of Margaret Elizabeth, and the Indian name of Zintkala Nuni (meaning in the Sioux language "Lost Bird") She was reared and educated at his home.