In 1595 he was ordered by King Philip II to colonize the upper Rio Grande Valley (explored in 1540-1542 by Francisco Vásquez de Coronado) and the Chamuscado and Rodriguez Expedition in 1581-1582 . His stated objective was to spread Roman Catholicism and establish new missions. He began the expedition in 1598, fording the Rio Grande (Río del Norte) at the present-day Ciudad Juárez–El Paso crossing in late April. On April 30, 1598, he claimed all of New Mexico beyond the river for Spain.

That summer his party continued up the Rio Grande to present-day northern New Mexico, where he encamped among the Pueblo Indians. He founded the province of Santa Fé de Nuevo México and became the province's first governor. Gaspar Pérez de Villagrá, a captain of the expedition, chronicled Oñate’s conquest of New Mexico’s indigenous peoples in his epic Historia de Nuevo México (1610).

Oñate soon gained a reputation as a stern ruler of both the Spanish colonists and the indigenous people. In October of 1598, a skirmish erupted when Oñate's occupying Spanish military demanded supplies from the Acoma tribe—demanding things essential to the Acoma surviving the winter. The Acoma resisted and 13 Spaniards were killed, amongst them Don Juan Oñate’s nephew. In 1599, Oñate retaliated; his soldiers killed 800 villagers. They enslaved the remaining 500 women and children, and by Don Juan’s decree, they amputated the left foot of every Acoma man over the age of twenty-five. Eighty men had their left foot amputated. Other commentators put the figure of those mutilated at 24.

In 1601, Onate, guided by Jusepe, the lone survivor of the Umana and Leyba expedition, undertook a large expedition to the Great Plains. Along with more than seventy Spanish soldiers and priests, a retinue of hundreds of Indian soldiers and servants, and seven hundred horses and mules Onate journeyed across the plains eastward from New Mexico in a renewed search for Quivira. As had Coronado, he encountered Apaches in what is now the Texas Panhandle. He proceeded eastward following the Canadian River into Oklahoma. Leaving the river behind in a sandy area where his ox carts could not pass, he went cross country, and the land became greener, with more water and groves of walnut and oak trees.

Jusupe probably led Onate on the same route he had taken with Humana and Leyva six years earlier. They found an encampment of people Onate called Escanjaques. He estimated the population at more than 5,000 living in 600 hundred houses. The Escanjaques lived in round houses as large as ninety feet in diameter and covered with tanned buffalo hides. They were hunters, according to Onate, depending upon the buffalo for their subsistence and planting no crops.

The Escanjaques told Onate that a large settlement of their enemies, the Rayados, was located only about twenty miles away in a region called Etzanoa. Thus, it seems possible that the Escanjaques had gathered together in large numbers either out of fear of the Rayados or to undertake a war against them. They attempted to enlist the assistance of the Spanish and their firearms, alleging that the Rayados were responsible for the deaths of Humana and Leyva a few years before.

The Escanjaques guided Onate to a large River a few miles away and he became the first European to describe the tallgrass prairie. He spoke of fertile land, much better than that through which he had previously passed, and pastures "so good that in many places the grass was high enough to conceal a horse." He tasted and found of good flavor a fruit that sounds like the Pawpaw.

Near the river Onate, the Spaniards, and their numerous Encajaque guides saw three or four hundred Rayados (painted or tattooed people) on a hill. The Rayados advanced, throwing dirt into the air as a sign that they were ready for war. Onate quickly indicated that he did not wish to fight and made peace with this group of Rayados who proved to be friendly and generous. Onate liked the Rayados more than he did the Escanjaques. They were "united, peaceful, and settled." They showed deference to their chief, named Catarax, whom Onate detained as a guide and hostage, although "treating him well.

Caratax led Onate and the Escanjaques across the river and to a settlement on the eastern bank, one or two miles from the river. The settlement was deserted, the inhabitants having fled. It contained "about twelve hundred houses, all established along the bank of another good-sized river which flowed into the large one [the Arkansas]. As he described it, the settlement of the Rayados seemed typical of those seen by Coronado in Quivira sixty years before. The homesteads were dispersed; the houses round, thatched with grass, large enough to sleep ten persons each, and surrounded by large graineries to store the corn, beans, and squash they grew in their fields. Onate restrained with difficulty the Escanjaques from looting the town and sent them home.

The next day Onate and his Spaniards and New Mexican Indians proceeded onward for another eight miles through heavily populated territory, although without seeing many Rayados. At this point, the Spaniard's courage deserted them. There were obviously many Rayados nearby and the Spaniards were warned that they Rayados were assembling an army. Discretion seemed the better part of valor. Onate estimated that three hundred Spanish solders would be needed to confront the Rayados, and he turned his soldiers around to return to New Mexico.