In 1844 he was chosen as a leader of the California Assembly.

In 1845, he was again appointed governor, succeeding Manuel Micheltorena. Pico made Los Angeles the province’s capital.

In the year leading up to the Mexican–American War, Governor Pico was outspoken in favor of California’s becoming a British Protectorate rather than a U.S. territory.

In 1846, when U.S. troops occupied Los Angeles and San Diego during the Mexican–American War, Pico fled to Baja California, Mexico, to argue before the Mexican Congress for sending troops to defend Alta California. Pico did not return to Los Angeles until after the signing of the Treaty of Guadalupe Hidalgo, and he reluctantly accepted the transfer of sovereignty.

In 1868, he constructed the three-story, 33-room hotel, Pico House, which was then most lavish hotel south of San Francisco and LA’s first three-story building.