The worst economic crisis in American history, called the Great Depression, began with the stock market crash of 1929. Investors and banks were wiped out. Factories closed, creating widespread unemployment. President Hoover hoped that state and city governments and charities would aid the poor. The immensity of the Great Depression was too overwhelming, though. In Texas, the Great Depression forced already-low cotton prices even lower. When drought and dust storms hit the Great Plains, many families lost their farms.

In 1930 Columbus "Dad" Joiner discovered the East Texas Oil Field, the largest oil field in the United States at the time. At first, surrounding areas prospered from the oil boom. So much oil was produced, however, that the price of a barrel of oil fell to ten cents or even less. The Texas Railroad Commission regulated the oil industry, and it ordered oil producers to limit production so that prices would increase again. Governor Ross Sterling called in the Texas National Guard to enforce the order. In 1935 oil prices became more stable.

President Franklin D. Roosevelt took office in 1933. He realized that state and local aid was not enough to help the poor, so he set up relief programs that became known as the New Deal. New Deal agencies provided many jobs for Texans. The federal government also encouraged Texas farmers to practice soil conservation methods, and farmers were paid to destroy crops in order to drive up crop prices.

African Americans and Mexican Americans were hit hard by poverty during the Great Depression. Dr. Lawrence Nixon, an African American physician from El Paso, fought for voting rights and won two cases in the United States Supreme Court. His courageous struggle was an inspiration to those who struggled for civil rights in the 1950s and 1960s. Mexican Americans also organized to work for their rights in the court system, in hiring, and in education.