The Mohawk and Hudson Railroad opened its line from Albany to Schenectady in 1831, and in only a few years a chain of short rail lines reached across the state. In 1853 they were combined into the New York Central Company. Other railways were built to serve other areas of the state, and canal traffic declined.

By mid-century New York City had become a center of manufacturing, and local industry had grown up throughout the state. The Civil War was a great stimulus to industrial development, especially the manufacture of garments and shoes. Population in New York almost doubled between 1860 and 1900, and more than doubled in the next 50 years. In addition to heavy foreign immigration, New York City attracted young professional people from all over the United States.

In the 19th century, the state had become the financial and cultural center of the country. Its preeminent national position has been reflected by the number of its governors who have been elected President of the United States—Martin Van Buren in 1836; Grover Cleveland in 1884 and 1892; Theodore Roosevelt in 1904; and Franklin D. Roosevelt in 1932, 1936, 1940, and 1944.

Following World War II, New York, the nation's leading industrial state, experienced rapid economic growth. Much social-reform legislation was enacted under the governorships of Democrat W. Averell Harriman, 1955–58, and Republican Nelson A. Rockefeller, 1959–73.

A postwar migration of large numbers of mainly poor and unskilled southern blacks and Puerto Ricans to New York's urban areas created many social and economic problems. Beginning in the 1970's, the state faced severe financial difficulties, caused in part by the need to provide social services for these groups. State finances improved as a result of economic growth in the 1980's, and in 1987 the state legislature enacted the largest income tax cut in New York history. A nationwide recession in the late 1980's and early 1990's, however, caused another state fiscal crisis and led to tax increases and budget cuts.

Also in the 1970's and 80's, New York began to address the issue of its hazardous nuclear waste sites; it is estimated that there are at least 500 such sites in the state. New York has other challenges, including improving the quality of social services, fixing highways, controlling the illegal distribution and use of drugs, and managing prisons better.

On September 11, 2001, the worst terrorist attack in United States history occurred. Two hijacked commercial planes crashed into and collapsed the twin 110-story World Trade Center towers in New York City, killing thousands of people.