Governor form 1813 to 1816 had a military reputation scarcely second to that of Harrison, being a distinguished Revolutionary soldier. President Madison appointed him Governor of Indiana Territory and for three years he served in that capacity, through part of the time his health was so precarious that he was obliged to live at Jeffersonville for the sake of medical attendance, while the seat of government was at Corydon. This somewhat impeded public business and aroused some criticism, but, nevertheless, at the close of his term, the Legislature highly commended his administration. "Many evils," affirmed that body, in its communication "have been remedied, and we particularly admire the calm, dispassionate, impartial conduct which has produced the salutary effects of quieting the violence of party spirit, harmonizing the interests as well as the feelings of the different parties of the Territory. Under your auspices, we have become one people."

Posey went from Indiana to Illinois, where he died in 1818. Posey County bears his name.