Lincoln spent 14 of his formative years, or roughly one-quarter of his life, from the age of 7 to 21 in Indiana. In December 1816, Thomas and Nancy Lincoln, their 9-year-old daughter, Sarah, and 7-year-old Abraham moved to Indiana. They settled on land in an "unbroken forest" in Hurricane Township, Perry County, Indiana. The Lincoln property lay on land ceded to the United States government as part of treaties with the Piankeshaw and Delaware people in 1804. In 1818 the Indiana General Assembly created Spencer County, Indiana, from portions of Warrick and Perry counties, which included the Lincoln farm.

The move to Indiana had been planned for at least several months. Thomas visited Indiana Territory in mid-1816 to select a site and mark his claim, then returned to Kentucky and brought his family to Indiana sometime between November 11 and December 20, 1816, about the same time that Indiana became a state. However, Thomas Lincoln did not begin the formal process to purchase 160 acres of land until October 15, 1817, when he filed a claim at the land office in Vincennes, Indiana, for property identified as "the southwest quarter of Section 32, Township 4 South, Range 5 West".

Lincoln, who became skilled with an axe, helped his father clear their Indiana land. Recalling his boyhood in Indiana, Lincoln remarked that from the time of his arrival in 1816, he "was almost constantly handling that most useful instrument." Once the land had been cleared, the family raised hogs and corn on their farm, which was typical for Indiana settlers at that time. Thomas Lincoln also continued to work as a cabinetmaker and carpenter. Within a year of the family's arrival in Indiana, Thomas had claimed title to 160 acres of Indiana land and paid $80, a quarter of its total purchase price of $320. The Lincolns and others, many of whom came from Kentucky, settled in what became known the Little Pigeon Creek Community, about one hundred miles from the Lincoln farm at Knob Creek in Kentucky. By the time Lincoln reached age thirteen, nine families with forty-nine children under the age of seventeen were living within a mile of the Lincoln homestead.