The stunning success of the American raid on Trenton shocked the British. Howe could hardly bring himself to believe that crack Hessian troops could have surrendered to “a ragged and undisciplined militia.” Trenton sent the British in New Jersey reeling. Several garrisons near the Delaware were abandoned. Howe ordered Charles Cornwallis into New Jersey to restore order.

Washington wanted to capitalize on his success. His victory had encouraged local Patriots. Militia were reporting to his camp, and more were rising in New Jersey. The enlistments of Washington's Continental troops, the heart of his army, were due to run out on New Year's Eve. Along with trusted officers like Henry Knox, Washington persuaded most of the men to stay on for a further six weeks in return for a ten-dollar bounty. He did not have the money he promised his troops, so he turned to Robert Morris, the Philadelphia financier. Morris risked his own credit to raise the necessary funds.

On December 30, Washington braved the icy Delaware River again and established his base at Trenton. Here he was reinforced by militia and Cadwalader's force, which had crossed the river a few days earlier. This gave Washington an army of 5,000 men, though many were untrained and inexperienced. His veterans, run down by months of campaigning and exposure to the elements, resembled a “flock of animated scarecrows.”

Washington did not anticipate the swiftness or intensity of the British reaction to his presence. Cornwallis was a hard-driving commander, and he was determined to crush Washington once and for all. He sent 8,000 men marching against Trenton, and on January 2, 1777, he had 6,000 men on its outskirts. Washington's troops skirmished with the leading British units as they came up. Critical to the American defense was Henry Knox's artillery train of forty guns, which laid down a heavy fire. By nightfall, the full British force had gathered. Some of Cornwallis's subordinates urged him to attack immediately. Cornwallis decided against a night assault. He believed he had Washington pinned down with the river at his back. He would “bag” Washington in the morning.

That evening Washington held a council of war. The army was in serious danger. Staying in place and retreating to the river seemed equally out of the question. The council made the bold decision to withdraw from Trenton, skirt around the British army, and strike at Princeton in its rear.

Washington had to get his army away without the British realizing what was going on. The campfires were piled with wood to keep them burning. A rearguard of 400 men watched the fires and made as much noise as possible digging trenches. As the army moved out, the wheels of wagons and the guns were wrapped with rags to muffle their rumbling on the roads.

At dawn on January 3, there were three British regiments in Princeton. Two had just set out to join Cornwallis at Trenton, when they were surprised to find American soldiers blocking their way. The British commander, Lieutenant Colonel Charles Mawhood, ordered a bayonet charge and drove back the American vanguard of 350 men. More Americans came up and were similarly routed. Then Washington arrived on the field and began rallying his men, exhorting them to move forward, setting an example by riding within thirty paces of the British line. The redcoats fired a volley, but Washington was untouched. Reinforcements made a timely appearance. The Americans volleyed and charged, and the British fell back. Washington led the pursuit, calling out to his men, “It's a fine fox chase, my boys!” Mawhood and part of his command fought their way through the Americans and escaped. The rest fled to Princeton. A number took shelter in Nassau Hall at the College. A cannon shot from Captain Alexander Hamilton brought a surrender.

The British lost between 273 and 400 men in this action. American casualties were forty killed and 100 wounded. Washington wanted to move on to New Brunswick, which held the tempting prize of a British payroll of £70,000. But Cornwallis was rapidly approaching from Trenton. The British general realized he had been fooled when he heard the sound of gunfire at Princeton, and he immediately marched in that direction. Washington fell back to the rough, easily defended terrain around Morristown. Here he set up his winter quarters. The British were forced to withdraw from all of New Jersey except for a strip along the Hudson.

Washington had swiftly recaptured much of what the British had conquered in the summer and fall. Washington's winter campaign revived his military reputation and reinvigorated the American war effort. Nicholas Cresswell, an Englishman visiting America far to the south, summed up the effects of Washington's achievement, writing, “A few days ago they had given up the cause for lost. Their late successes have turned the scale and now they are all liberty mad again…. They have recovered their panic, and it will not be an easy matter to throw them into that confusion again.”