In 1854, Gen. Larimer branched into land speculation in the Kansas territory and founded a homestead near present day Leavenworth, Kansas. In 1857, acting as president of the Larimer City Town Company, he filed a second land claim for 320 acres near what is now Laplatte, Nebraska. Continuing his travels around the plains states, and in search of another business opportunity, he moved to Leavenworth proper in 1857, but in the fall of that year decided to try his luck in the Pikes Peak Gold Rush and led a party of settlers and prospectors west, settling on the eastern shores of Cherry Creek.
The site that Larimer chose, near the confluence of Cherry Creek and the South Platte River, had already been favored by prospectors and settlers as an ideal location for for prospecting for placer deposits of gold and as a site upon which to build a new town. Farther south on the Platte River the Lawrence Party had founded Montana City early in 1858. The Russell Party, led by William Greeneberry Russell and originally from Georgia, had established a settlement called Auraria between the arms of the South Platte and Cherry Creek. A third party, led by John Easter, had established a small settlement on the eastern banks of Cherry Creek, across the water from Auraria.
It's at this point in the story that controversy arises. The Easter Party, eager to get their claim to the land recognized, had established a settlement called St. Charles and then immediately sent the bulk of their party back to the government offices in Kansas to file their claim and get legal recognition for their settlement. The Larimer Party arrived on the scene and immediately recognized the benefits of the land where the Easter Party had built their camp. Laying on higher ground than the Auraria settlement, and located on the more accessible ground to the east of the Cherry Creek and South Platte watersheds, the spot was an ideal place for the settlement of a new town. In a letter to his wife and children back in Kansas Larimer wrote,
"It is well the Pilgrims landed upon Plymouth Rock and settled up that country before they saw this one or that would now remain unsettled. Everyone will soon be flocking to Denver for the most picturesque country in the world, with fine air, good water, and everything to make man happy and live to a good old age."
Gen. Larimer named the new township Denver City in honor of James W. Denver, then governor of the Kansas Territory, in aan effort to ensure that the new town would be chosen as the county seat of what was then known as Arapahoe County, Kansas Territory. Larimer continued to engage in land speculation and sold parcels of land and mining claims to the settlers and prospectors that were flooding the state during the Pikes Peak Gold Rush. Ever a force to be reckoned with in local politics, he claimed in a letter dated to 1859 that, "I am Denver City". By 1860 Denver City had eclipsed Auraria as the dominant civic force and the two townships were merged to form a single city. Larimer remained a powerful and important local politician through the bulk of the 1860s, where he was instrumental in the creation of the Colorado Territory in 1861. After being denied the position of the first governor of the newly created Colorado Territory, a post that went to William Gilpin as part of favors owed to him by Abraham Lincoln, Larimer became a judge of probate for the First Judicial District of Colorado and, during the Civil War, acted as a Colonel of the Third Regiment of Colorado volunteers.
Following the Civil War Larimer returned to Leavenworth, Kansas with his family where he served as a Kansas senator from 1867 until 1870. He was a lifelong radical abolitionist and fought for women's suffrage in Nebraska, though his political ideals ended up costing him in the end. Gen. William Larimer, Jr. died in 1875 in Leavenworth, Kansas and is buried in the Leavenworth National Cemetery. His name is commemorated by Larimer Street and Larimer Square in downtown Denver, as well as Larimer County in northern Colorado, and the Larimer neighborhood in Pittsburgh, Pennsylvania.