During the 1850s and 1860s, Sherman continued to develop and it participated in the regional politics. The first flour mill was built in 1861. In 1862 the publisher of Sherman's anti-secessionist Whig newspaper, the Patriot, was murdered. During and after the Civil War, north Texas outlaw bands led by Jesse James and William Quantrill were seen in Sherman. Years later, James spent at least part of his honeymoon in Sherman, where he was photographed on horseback.
Education also developed in north Texas during this time. The Sherman Male and Female High School started accepting students during 1866, under the patronage of the North Texas Methodist Conference. It was one of three private schools in Sherman at the time. This school operated under several names (North Texas Female College and Conservatory of Music beginning in 1892 and Kidd-Key College and Conservatory beginning in 1919) until 1935. It gradually lost Methodist support, after the opening of Southern Methodist University in 1915 in Dallas, TX. In 1876, Austin College, the oldest continuously operating college in Texas, relocated from Huntsville to Sherman. Sherman Female Institute, later known as Mary Nash College, opened in 1877 under sponsorship of the Baptist Church. It continued operation until 1901 when the campus was sold to Kidd-Key College. Carr-Burdette College, a women's college affiliated with Disciples of Christ, operated there from 1894 to 1929.
While there was general depression and lawlessness during Reconstruction, Sherman remained commercially active. During the 1870s Sherman's population reached 6000. In 1875, two fires destroyed many buildings east of the square. They were rebuilt with superior materials. This included a new Grayson County Courthouse built in 1876. In 1879, Old Settlers' Association of North Texas formed and met near Sherman. The Old Settlers' Association of Grayson County incorporated in 1898 and completed purchase of Old Settlers' Park in 1909.
On May 15, 1896, a tornado measuring F5 on the Fujita scale struck Sherman. The tornado had a damage path wide and long, killing 73 people and injuring 200. About 50 homes were destroyed, with 20 of them being completely obliterated.
In 1901 the first electric "Interurban" railway in Texas, the Denison and Sherman Railway, was completed between Sherman and Denison, Texas. The Texas Traction Company completed a interurban between Sherman and Dallas, Texas in 1908 and it purchased the Denison and Sherman Railway in 1911. Through the connections in Dallas and Denison, it was possible to travel to Terrell, Texas, Corsicana, Texas, Waco, Texas, Fort Worth, Texas, Cleburne, Texas, Denton, Texas, and to Durant, Oklahoma by interurban railways. One popular destination on the Interurban between Sherman and Denison was Loy Lake Park, a private amusement park at the time. By 1948, all interurban rail service in Texas had been discontinued.
During the Sherman Riot of 1930 (May 9, 1930), Sherman's elegant second courthouse was burned down by arson during the trial of the black man George Hughes. During the riot, Hughes was locked in the vault at the courthouse. He died in the fire. After rioters retrieved Hughes' body from the vault, it was dragged behind a car, hung, and set afire. Texas Ranger Frank Hamer was in Sherman during this riot and reported the situation to Texas Governor Dan Moody. Governor Moody sent National Guard troops to Sherman on May 9 and more on May 10 to control the situation.
As of August 10, 2008, 17 people were killed and approximately 30 were hospitalized with injured early August 8, 2008 when a private charter bus headed from Houston to Missouri crashed along northbound U.S. Highway 75 in the southern part of Sherman. The passengers were from the Vietnamese Martyrs Church of Houston on their way to a religious retreat in Carthage, Missouri.
According to the United States Census Bureau, the city has a total area of 38.6 square miles (100.0 km²), of which, 38.5 square miles (99.8 km²) of it is land and 0.1 square miles (0.2 km²) of it (0.18%) is water.
There are 13,739 households out of which 30.9% have children under the age of 18 living with them, 46.7% are married couples living together, 13.4% have a female householder with no husband present, and 35.8% are non-families. 30.4% of all households are made up of individuals and 12.5% have someone living alone who is 65 years of age or older. The average household size is 2.42 and the average family size is 3.01.
In the city the population is spread out with 24.6% under the age of 18, 13.1% from 18 to 24, 27.8% from 25 to 44, 19.3% from 45 to 64, and 15.1% who are 65 years of age or older. The median age is 34 years. For every 100 females there are 92.1 males. For every 100 females age 18 and over, there are 89.3 males.
The median income for a household in the city is $34,211, and the median income for a family is $42,528. Males have a median income of $31,828 versus $23,363 for females. The per capita income for the city is $18,717. 13.3% of the population and 9.6% of families are below the poverty line. Out of the total population, 14.7% of those under the age of 18 and 11.7% of those 65 and older are living below the poverty line.
The private institution Austin College makes its home in Sherman. Austin College is a nationally-known liberal arts college. Founded in 1849, it is the oldest college or university in Texas operating under its original charter. Grayson County College, based in neighboring Denison, operates a branch campus in Sherman.