Blount hoped to be elected to the first U.S. Senate. When he failed to achieve that end, in 1790 he pushed westward beyond the Appalachians, where he held speculative land interests and had represented North Carolina in dealings with the Indians. He settled in what became Tennessee, to which he devoted the rest of his life. He resided first at Rocky Mount, a cabin near present Johnson City and in 1792 built a mansion in Knoxville.
Two years earlier, Washington had appointed Blount as Governor for the Territory South of the River Ohio (which included Tennessee) and also as Superintendent of Indian Affairs for the Southern Department, in which positions he increased his popularity with the frontiersmen. In 1796 he presided over the constitutional convention that transformed part of the territory into the State of Tennessee. He was elected as one of its first U.S. senators (1796-97).
During this period, Blount's affairs took a sharp turn for the worse. In 1797 his speculations in western lands led him into serious financial difficulties. That same year, he also apparently concocted a plan involving use of Indians, frontiersmen, and British naval forces to conquer for Britain the Spanish provinces of Florida and Louisiana. A letter he wrote alluding to the plan fell into the hands of President Adams, who turned it over to the Senate on July 3, 1797. Five days later, that body voted 25 to 1 to expel Blount. The House impeached him, but the Senate dropped the charges in 1799 on the grounds that no further action could be taken beyond his dismissal.
The episode did not hamper Blount's career in Tennessee. In 1798 he was elected to the senate and rose to the speakership. He died 2 years later at Knoxville in his early fifties. He is buried there in the cemetery of the First Presbyterian Church.