With incorporation, the pace of Appleton's growth increased. People were moving in at such a fast rate that the value of land was skyrocketing and lumber became increasingly expensive and scarce. In the summer of 1855, nearly 100 new houses were constructed, and even that wasn't sufficient to satisfy the demand. Despite this progress, however, problems of the wilderness remained. In the mid-1850s, Appleton was plagued by bears that wandered into the village, eating pigs and scaring children. A few years later, thieves and burglars became a problem and a special night watch had to be established.
Meanwhile, industry was also growing in Appleton. On February 13, 1855, the Appleton Manufacturing and Water Power Company was founded, and the amount of work on the river increased. At times that work proved dangerous. Two men lost their lives in April, 1855, when a lower dam gave way and they were swept down the rapids. In the downtown area, whole blocks of brick buildings were going up. One of these buildings was the Outagamie County Bank, the first bank owned and operated by Appleton citizens.
With prosperity came some legal complications. In January, 1857, the original Lawrence University building burned down while the entire community was attending a church service with a two-hour sermon. By that time Main Hall had been completed and the school trustees saw no reason to replace the destroyed building. Instead, they divided the land into lots, which they then sold. At this point Edward L. Meade, the heir to John F. Meade, sued the school. He pointed out that the original deed between Meade and Mr. Lawrence dated September 7, 1847, called for the Lawrence Institute to be "permanently located upon said lands," and for at least $5,000 to be spent on improvements. Unless those terms were followed, the land was to revert back to the original owner. By not rebuilding after the fire, Edward Meade maintained that the terms of the deed had been violated and that all of the original Meade land now belonged to him. That land included all of Appleton's downtown business area, the most valuable property in the village. In response, the leaders of Lawrence University insisted that they were not violating the deed at all, and that they were within their rights to divide and sell the property. The court battle was long and complicated, and eventually went all the way to the United States Supreme Court, which finally ruled against Edward Meade's claim in 1869.
As that lawsuit was moving through the courts. Appleton continued to grow and prosper. Early in 1857, the state legislature approved Appleton's request to incorporate as a city. Under the new city charter, Appleton remained divided into three wards, with future plans for a fourth ward south of the Fox River. Each ward was to elect two aldermen, a justice of the peace, and a constable. Each ward also voted its own taxes for ward improvements. The city as a whole elected a mayor, a director, and a marshal. Special city taxes could be voted for waterworks, fire engines, and other city-wide improvements.
The first city election was held on April 21, with Amos Story chosen as the first mayor. With a population of approximately 2,000, Appleton officially became a city on May 2, 1857.