Powderly advanced rapidly in the organization and in 1879 was appointed as grand master workman, the union's highest post. At that time the Knights had an estimated 10,000 members. As leader of the organisation he was instrumental in the establishment of labor bureaus and arbitration systems in a large number of states.
Powderly was also a member of the Greenback Labor Party. The party program included the coinage of silver on a par with gold, an adequate supply of money, the taxing of government bonds, a maximum eight-hour day, the introduction of graduated income tax and opposition to railroad land grants. Powderly was elected three times as mayor of Scranton, Pennsylvania, serving from 1878 to 1884.
The popularity of the Knights of Labor dramatically declined following the Haymarket Bombing in Chicago on 4th May, 1886. One of those executed had been a Knight and the membership plummated after false rumours circulated claiming that the organisation had been infiltrated by anarchists.
The journalist, Theodore Dreiser, saw Powderly address a meeting during this period: "Some are silk purses and others sows' ears and cannot be made the one into the other by any accident of either poverty or wealth. Just at this time, however, after listening to Mr. Powderly (a significant man in connection with that movement) and taking notes on his speech, I came to the conclusion that all laborers had a just right to much better pay and living conditions, and in consequence had a great cause and ought to stick together - only I was not one of them."
The author of Thirty Years of Labor (1889), Powderly was appointed U.S. Commissioner General of Information (1897-1902) and head of the Division of Information in the Bureau of Immigration (1907-21). Terence Powderly died on 24th June, 1924. His autobiography, The Path I Trod (1940) was published posthumously.