The train ride across the Isthmus took about 5 hours, due to the various stop it made along the way to pick up and discharge passengers. The train arrived in Panama City at about 7:00 PM and the station was on the water front. Because Panama City had no wharfs, where ships like the John L. Stephens could dock at the waters front, the large steamships had to dock by the islands in the bay. Taboga Island was the primary docking site, and that was a short distance from town. For the passengers to get on board, they had to be ferried from the city, to Taboga. There was a steam motor boat, named Taboga, that would transport the passengers. At the time the train pulled into Panama City, the tide was out, and the Taboga was stranded on a shoal. High tide was not expected until 11:00 PM, therefore, the passengers had to wait for the tide. By 8:00 PM, there were some 50 passengers already onboard the Taboga, waiting for the tide. Others were at the ticket office and others were taking in the sights of Panama City. 

Jack Oliver and his companions had been living it up, and he was now very drunk. About a block from the railroad station, there was a Negro vendor, selling watermelon, and Jack grabbed a slice, and refused to pay for it. Has he started to walk away, the vendor started yelling, wanting to be paid his 10 cents. Jack, very arrogantly, refused to pay and continued walking away, laughing at the vendor. The vendor pulled a knife and threatened Jack, that if did not pay, he would cut him up. One of Jack's companions tossed the 10 cents at the vendor, but he continued yelling. Jack pulled his revolver, and aimed it at the vendor, who took off running. Another Negro, that was observing the event, grabbed Jacks arm, and struggled with him, for the gun. The gun went off, wounding another bystander that was in the crowd, that was gathering.

More shots were fired and the mob comprised mostly of Negroes, charged into the hotels, destroying property and beating up all the white in the vicinity. Now, there were over 3,000 Americans in town, waiting to catch the north bound steam ships, heading to San Francisco. Some of them had just arrived on the steamer Golden Gate, that arrived from San Francisco. They were heading east, and they were also caught in the riot. People were being beaten up, robbed and some were murdered. 

When the riot broke out, the Captain McLane of the Taboga, sent a message to the chief of police, Colonel Garrido. He informed the chief of police, that the mob had gotten out of hand, and was about to attack the railroad station, where a large group of passengers had taken refuge. He was also scared that the mob would attack to the Taboga. The Taboga had a small cannon that Captain McLane fired, scaring away the crowd that was attacking the railroad station. Most of the passengers were armed, and pulled and cocked their guns, just in case they were rushed.

When the police arrived on the scene, they first went to the Taboga, and disarmed the passengers, and confiscated the cannon. The crowd, seeing that the Taboga had been disarmed, and could not fire upon them, renewed their attack on the railroad station. The police, after disarming the passengers, turned their attention to the railroad station. This was a large, brick building, that much sturdier than most of the other buildings in the vicinity. Many passengers took refuge in the building, while the Joseph Stokes, the freight agent, boarded up the place. Stokes then sent a telegraph to the other stations, reporting on the incident, and requesting that Randolph Runnels, come to their defense.

When the police arrived at the railroad station, the mob was firing their guns at the station, while those in the station were firing back. The police approached the mob with fixed bayonets, ready to disperse the mob. As they approached, the crowd, the crowd parted to let them through. By chance, one of the policemen was hit by a bullet fired from inside the station, and he died. When this happened, the police joined the mob, and they too, began firing at the station.

Once the population saw the action of the police, and how they joined the mob, all hell broke loose. Those that were just observing the happenings, joined the mob. They started ransacking all business owned by foreigners and trying to steal weapons to kill all the hated Yankees. The mob went to the military arsenal to get arms, but found it locked. They then went to the Governor Aniño, demanding that he turn over the key, which he refused. Without the keys to the arsenal, they returned to the train station, to join those that were attacking the station.

At the railroad station, the mob had taken a telegraph pole, and were using it as a battling ram, trying to smash in the door. Others were firing between the cracks in the window, doors, any place they could. Inside the depot, Joseph Stokes the freight agent and Robert Marks, the depot watchman, had loaded an old mortar with black powder and blots and rivets. They aimed it at the door, waiting for the crowed to break down the door. In the mean time, most of the passengers, had moved up to the second floor of the building, barricading the stairs.

When the mob, broke in the door, Stokes and Marks fired the mortar, killing one of the attackers, and wounding others. The crowd poured into the station, killing Stokes and Marks. They then turned their attention on those that had taken refuge on the second floor. When they rushed the stair, those upstairs fired on them, hitting many of them, and the crowd backed up. As shots were being exchanged between the mob and the Americans upstairs, a train was approaching with reinforcements for the embattled railroad men hold up in the station.

Has the train pulled into the station, they were blowing the whistle causing the mob to be taken back. The locomotive was pulling a lot of cars, filled with armed railroad men from Cruces. The men were headed by Randolph Runnels, the ex Texas Ranger, and leader of the disbanded Isthmian Guard. As the train pulled in to the station, the railroad men open fire on the crowd that was attacking the station. Some of the mob, ran away, while others poured into the station, to protect themselves from the firing from the outside. They were then caught in a cross fire, from the railroad men outside, and the passengers on the second floor. 

Fearing for the safety of those inside, Runnels called out to the rioters, telling them to put down their arms, and come out with their hands over their head. Recognizing the voice of Runnels, El Verdugo (the Hangman), they quickly obeyed. In the confusion, most of the rioters got away, but the passengers were saved.

Within the week, Governor Aniño submitted his report, white washing his police, and blaming the entire incident on the Americans. The official report listed 15 American dead, and 16 wounded. There were 2 Panamanians dead, and 13 wounded. He stated that the people in the train station, were firing indiscriminately on all those outside, and that they started the firing. He claimed that there was a cannon in the station, that was also being fired upon the people outside the building. He also disputed the report that the police joined the rioters, but claimed that they tried very hard to calm the crowd, but found it difficult, with the Americans in the station, firing at anything that moved outside.

Corwine reported that "the dispute relative to the slice of watermelon was seized upon as a pretext by the colored population to assault the Americans and plunder their property... but the assault on the railroad station was deliberately planned by the Police and the mob."

Corwine also reported that the resentment of the Panamanians towards the Americans had been brewing for some time. In Panama, there was a very high unemployment, due to the fact, that once the railroad was completed, the large labor force was terminated. The only labors remaining employed by the railroad, was what was necessary to maintain the line. All of the supervisory and administrative staff, was composed of U.S. citizens. Those that employed at one time, in the business of transporting the Argonauts across the Isthmus, were now without jobs. With the addition of more ships, transporting passengers between Panama and California, passengers spent very little time in Panama. The same was true for the situation on the Atlantic coast, where most passengers were shipping out on the same day they arrived in Aspinwall (Colon). Most of the passengers, in those days, were arriving in the morning, and were out of the country that evening. The introduction of steam tenders, to move passengers from Panama City, to the ships that were anchored out in the bay, took away the job of those that used to row the passengers from the city to the ships.

Corwine ended his report with the following statement "The Government of New Granada is unable to enforce order and afford adequate protection to the transit.... I recommend that immediate occupation  of the Isthmus, from Ocean to Ocean, by the United States, unless New Granada can satisfy us as to her ability and inclination to afford proper protection and make speedy and ample atonement."