Inauguration Day for James Madison occurred in March 4, 1809. It was festive day; the President-elect arrived at the Capitol with an escort of cavalry and took the oath of office. After a brief address, he returned to his home where he and Dolley opened their doors to the public. The first-ever Inaugural Ball took place that evening at a nearby hotel.

President Madison's first cabinet consisted of Robert Smith, former Secretary of the Navy, as Secretary of State; Albert Gallatin as Secretary of the Treasury; William Eustis as Secretary of War; and Paul Hamilton as Secretary of the Navy. Thomas Jefferson's Attorney General, Caesar Rodney, kept his spot in the Madison Administration. This cabinet was short-lived: there was much discord among the officers, exacerbated by a Congress that stood in strong opposition to Madison's Administration.

Rather than attempt to control Congress by personal influence, Madison remained passive before its power, and instead focused on foreign affairs, which were, in fact, of great concern generally in the first years of his presidency. One of Madison's first major actions was to reverse the trade embargoes against Britain which he had supported so strongly when they were implemented under Jefferson. This was done on the guarantee that Britain would end its aggressive behavior toward American commerce on the high seas. Such behavior continued, however, and Anglo-American relations only worsened.

On the domestic front, controversy brewed once again over the question of the national bank, whose charter–inaugurated under George Washington and Alexander Hamilton–was up for renewal. Madison's Secretary of the Treasury, Albert Gallatin, supported the renewal, but many of Madison's Republican allies held opposite view. Madison himself had been a staunch opponent of the creation of the Bank of the United States when it came up for a vote in Congress back in the 1790s. One of Madison's supporters, Henry Clay of Kentucky, argued the case that such a nationally operated bank was unconstitutional. The renewal of the charter was defeated by a tiny majority in the Congress, and Secretary Gallatin put forth a letter of resignation.

The President did not accept Gallatin's resignation, and instead forced Secretary of State Robert Smith to resign. Smith was a radical Republican who had opposed the renewal of the charter. Smith was also the brother of the leader of the Senate who had opposed Madison on many points. Smith was replaced by James Monroe. This was an important political move for Madison, as it was done out of Madison's desire to unify the cabinet in its loyalty to himself and the Administration. Monroe, a fellow Virginian, proved to be a very loyal and effective member of the cabinet.

After these internal cabinet moves were settled, Madison's Administration had to deal with the growing conflict in the Northwest Territory between the Indian nations under the great Shawnee chief Tecumseh and the advancing population of white settlers. A long and very bloody battle occurred at Tippecanoe in Indiana between the rallied Indian forces under Tecumseh's brother, called the Prophet, and the American commander William Henry Harrison, a future president. long, bloody and indecisive battle. The outcome of this battle was not a cut and dry defeat for either side, but it had the effect of discouraging the Indian nations from rallying once again in such a unified manner.

The battle of Tippecanoe had an added international factor. Many of those who were hostile to the British thought that Tecumseh's success in rallying to war had been encouraged by British aid and comfort of the Shawnee chief. There was a rising war fever throughout the United States, and many called for the government to advance into Canada to both end the threats posed against white settlers by the Indians and to expel Great Britain from North America. Many Republicans in Congress soon came to echo these sentiments, but President Madison was not moved to enter into armed conflict with Britain.

Relations between America and Napoleon's France worsened. The French began engaging in hostile acts against American ships, putting Madison and his Administration in a strange position, since they had been on the brink of arming for war against France's chief enemy, the British. By early 1812, Madison was considering fighting both powers at the same time.

At the same time that Madison and the Congress were deliberating over questions of war, the President faced his bid for reelection in the fall of 1812. He was re-nominated by his party, and was opposed in the race by DeWitt Clinton of New York. Madison won easily in the election, alongside the Vice Presidential nominee Elbridge Gerry, who was one of the three men in the 1788 Convention who refused to sign onto the Constitution. Gerry would die in office, as did Madison's first Vice President, George Clinton.