Due to his military exploits, and his willingness to serve the Americans without compensation, Steuben made a positive impression on both Congress and General George Washington, who appointed him as temporary Inspector General of the Continental Army.

Appalled by the state of U.S. forces, Steuben took the lead in teaching soldiers the essentials of military drills, tactics, and discipline based on Prussian techniques. He wrote Regulations for the Order and Discipline of the Troops of the United States, which remained the army's drill manual for decades, and continues to influence modern U.S. army manuals. As these reforms began bearing fruit on the battlefield, in 1778, Congress, on Washington's recommendation, commissioned Steuben as Inspector General with the rank of Major General. He served the remainder of the war as Washington's chief of staff and one of his most trusted advisors.

After the war, Steuben was made a U.S. citizen and granted a large estate in New York in reward for his service. In 1780, he was elected a member of the American Philosophical Society, a learned society that included many of the nation's most prominent Founding Fathers.