In 1814 he became a partner in the company. In 1816 McLoughlin was arrested for the murder of Robert Semple, the governor of the Red River Colony, though it is often claimed he stood in proxy for some Indians who were blamed. He was tried on October 30, 1818, with the charges being dismissed. McLoughlin was instrumental in the negotiations leading to the North West Company's 1821 merger with the Hudson's Bay Company.

In 1824 the Hudson's Bay Company appointed McLoughlin as Chief Factor of the Columbia District in the Oregon Country, which comprised 600,000 square miles (1,600,000 km²) between Spanish California and Russian Alaska, with Peter Skein Ogden appointed to assist him. At the time, the Oregon Country was under cooperative settlement of both the United States and Britain. Upon his arrival, he determined that the present headquarters of the company at Fort Astoria (now Astoria, Oregon) at the mouth of the Columbia River was unfit. As a replacement he built Fort Vancouver (now Vancouver, Washington) across the Columbia at the mouth of the Willamette River. The post was opened for business on March 19, 1825. From his headquarters in Fort Vancouver he supervised trade and kept peace with the Indians, inaugurated salmon and timber trade with California and Hawaii, and supplied Russian Alaska with produce. Under McLoughlin's management, the Columbia District remained highly profitable, in part due to the ongoing high demand for beaver hats in Europe.

McLoughlin's appearance, 6'4" (193 cm) tall with long, prematurely white hair, brought him respect, but he was also generally known for his fair treatment of the people with whom he dealt, whether they were British citizens, U.S. citizens, or Native Americans. At the time, the wives of many Hudson's Bay field employees were Native Americans, including McLoughlin's wife Marguerite.

When three Japanese fishermen, among them Otokichi, were shipwrecked on the Olympic Peninsula in 1834, McLoughlin, envisioning an opportunity to use them to open trade with Japan, sent the trio to London on the Eagle to try to convince the Crown of his plan. They reached London in 1835, probably the first Japanese ever to do so. The British Government finally did not show interest, and the castaways were sent to Macau so that they could be returned to Japan.

In 1841, with the arrival of the first wagon train, McLoughlin disobeyed company orders and extended aid to the American settlers. Relations between Britain and the United States had become very strained, and many expected war to break out any time. McLoughlin's aid probably prevented an armed attack on his outpost by the numerous American settlers. The settlers understood that his motives were not purely altruistic, and some resented the assistance, working against him for the rest of his life. The Hudson's Bay Company eventually realized that the increasing numbers of American settlers would result in Ft. Vancouver becoming part of U.S. territory. In response they ordered McLoughlin to move their operation north to Vancouver Island where he constructed Fort Adelaide (now Victoria, British Columbia, Canada).

After retiring from the Hudson's Bay Company in 1846, McLoughlin moved his family back south to Oregon City in the fertile Willamette Valley. The valley was the destination of choice for settlers streaming in over the Oregon Trail and had become officially U.S. territory in the Oregon Treaty. At his Oregon City store he sold food and farming tools to settlers, became the last stop on the Trail. In 1847, McLoughlin was given the Knighthood of St. Gregory, bestowed on him by Pope Gregory XVI. He became a U.S. citizen in 1849. McLoughlin's opponents succeeded in inserting a clause forfeiting his land claim in the Donation Land Claim Act of 1850. Although it was never enforced, it embittered the elderly McLoughlin. He served as mayor of Oregon City in 1851, winning 44 of 66 votes. He died of natural causes in 1857.

In 1953, the state of Oregon donated a bronze statue of McLoughlin to the U.S. Capitol's National Statuary Hall Collection. The title "Father of Oregon" was officially bestowed on him by the Oregon Legislature in 1957, on the centennial of his death.