 On November 11, 1876, Pope Pius IX appointed Spalding as the bishop of the Roman Catholic Diocese of Peoria, newly created out of part of the Diocese of Chicago.He was installed as the first Bishop of Peoria on May 23, 1877
by Cardinal John McCloskey, Archbishop of New York, with Thomas Patrick Roger Foley, Coadjutor Bishop of the Diocese of Chicago presiding.As bishop, Spalding greatly valued education.