Grey was favoured by fortune and talent. The British Treasury relaxed the stringency which had frustrated his predecessors; he had sufficient troops at his disposal to make some head against rebellion; and for a time he had the goodwill of the settlers. Even the economic climate favoured his reputation; by the early 1850s a gold rush in Australia created a market for foodstuffs and livestock for the New Zealand farmer, Maori and Pakeha. But Grey's success was not all a matter of favourable circumstances; he knew well how to exploit his advantages, cover up his weaknesses, and avoid the consequences of his errors.

His first task was to subdue Maori discontent. By January 1846 Heke and Kawiti were defeated; Grey had over 1,000 men as well as Maori allies. His peace settlement, at once firm and conciliatory, brought a peace to the North which was never subsequently broken. But the troubles around Wellington were not to be so expeditiously ended. At no time did Grey have sufficient forces for a decisive offensive; he contented himself with the defence of Wellington and its northern access routes, and relied upon Maori allies to isolate and neutralise the rebels. By August 1846 this policy had succeeded; in the following month some minor rebels were executed as an example. The leader of Maori disaffection, Te Rangihaeata, contrived to elude capture and punishment. The less implicated and ageing Te Rauparaha was, indeed, seized and held without trial, and this extra-legal action contributed greatly to Grey's success. In July disturbances around the tiny settlement of Wanganui had come to an end. The vigorous opening of the new governorship had established a peace which was to last until the end of the 1850s.

Grey enjoyed nothing like the same success with the settlers. If the Company had failed in all else, it had at least brought a great number of settlers to New Zealand (of over 11,000 settlers in 1842, 7,500 lived in southern (Company) settlements; 3,700 of them in Wellington; of the 3,500 non-Company settlers in the north, nearly 3,000 lived in Auckland).

These included many who were zealous advocates of the rights of the subject. They chafed under the single-person rule of the Governor and utilised the security Grey had given them to agitate for self-government. An Act conferring representative institutions, and also dividing the colony into two provinces, New Ulster and New Munster, had been passed by the Imperial Parliament in 1846; it was a cumbersome and futile piece of doctrinaire planning, and Grey persuaded the Colonial Secretary to have suspended all provisions except the provincial division of the colony. But this suspension, in 1848, further inflamed settler agitation, carried on through meetings, banquets, and a vigorous press. From 1848 to 1852 Grey tried to introduce popular elements into the autocratic Crown Colony system, but the settlers, especially in the Company settlements and Canterbury, held out for full representative institutions. Such institutions, Grey knew, were sure to come, but (perhaps) he had for his part no desire to govern through them. And further, he held that some crucial problems needed his solution before the settlers could safely take over the country. These were the questions of land settlement and native policy.

His land policy was twofold; first, to speed up the process of settlement and, secondly, to guide it into proper channels. To effect the first he bought land in quantity from the Maoris for sale and lease to settlers: nearly 30 million acres in the South Island at a cost of £13,000, some 3 million acres in the North at three times the cost. Thus purchases in 1847–48 at last gave Company settlers a title to their land in and around Wellington, the Taranaki, and Wanganui districts; the largest single purchase, of 20 million acres in 1848, cleared the way for the Otago and Canterbury settlements; 1851 saw the Hawke's Bay area open for settlement, while the 1853 transactions opened the Wairarapa, Southland, and substantial districts around Auckland. In these dealings Grey was aided by his reputation with and understanding of the Maoris, and not less by abundant funds. Further, the income from sales to settlers, together with customs, brought buoyancy to the public finances and eased the burden on Government.

In land sales policy, Grey sought to secure a place for the small independent farmer, while stimulating sales and also encouraging the large pastoralist, while not attempting to curb land speculation. The Regulations of 1853, gazetted a full year before the first meeting of the General Assembly in an effort to present that body with a fait accompli, certainly lowered the price of land and provided for small farmer settlement, but it placed no limit on total purchases and provided for large leasehold runs. There was some radicalism in the scheme, well tempered by realism.

By 1853 Grey was as unpopular among settlers as his predecessors had been, chiefly for his maintenance of autocratic rule. Two major settlements had been founded since his rule began: Otago in 1848 and Canterbury in 1850, both by quasi-religious associations, the former Presbyterian and the latter Anglican, acting under the aegis of the moribund New Zealand Company. The Otago plan was the humbler, but even so this Scottish settlement did not fulfil expectations for a number of years. The Canterbury founders planned for little less than an Anglican Utopia, and though they painlessly set up a substantial colony, it fell far short of their dreams. The chief distinguishing feature of these settlements was the appropriation of part of the purchase price of land to religious and educational purposes; the uniform religious establishment contemplated in either case did not emerge, but in Otago public money in some quantity was devoted to the beginnings of an educational system.

The Canterbury Association sent some able and spirited men to lead their colony: three of them, John Robert Godley, Henry Sewell, and James FitzGerald, quickly became leaders in the anti-Grey campaign; Sewell and FitzGerald were later notable in politics. But while Grey was being reviled for autocracy he was in fact laying the foundations of the Act of 1852 conferring representative institutions. He was in no hurry; he wanted to push through his native policy untrammelled by what he believed to be settler greed and folly.

Grey aimed at the cultural and economic welfare of the Maori people through their rapid assimilation to European civilisation. Without doubt he overestimated the speed with which such a process could be carried through and, further, his innovations were not on a scale sufficient to effect any major change. But public money was spent on education, health services, and agricultural instruction, while administration was put on a sounder footing by the disbanding of the Protectorate Department set up in 1840 under George Clarke. Grey personally took charge, using the best talent he could find, and receiving advice from Maoris as well as officials. A magistracy and a racially mixed police force were to take European law into Maori districts; Grey reversed FitzRoy's policy of exempting Maoris from the normal operation of the law. This policy had some effect on the fringes of Maori New Zealand, but the remoter parts remained untouched. Further, its beneficial effects could not outweigh the factors causing Maori apprehension for the future; such fears had become marked by the end of Grey's term, in 1853.