On September 30, 1846, Morton performed a painless tooth extraction after administering ether to a patient. Upon reading a favorable newspaper account of this event, Boston surgeon Henry Jacob Bigelow arranged for a now famous demonstration of ether on October 16, 1846 at the operating theater of the Massachusetts General Hospital. At this demonstration Dr. John Collins Warren painlessly removed a tumor from the neck of a Mr. Edward Gilbert Abbott. The theatre came to be known as the Ether Dome and has been preserved as a monument to this historic event. Following the demonstration, Morton tried to hide the identity of the substance Abbott had inhaled, by referring to it as "Letheon", but it soon was found to be ether.

A month after this demonstration, a patent was issued for "letheon", although it was widely known by then that the inhalant was ether. The medical community at large condemned the patent as unjust and illiberal in such a humane and scientific profession. Morton assured his colleagues that he would not restrict the use of ether among hospitals and charitable institutions, alleging that his motives for seeking a patent were to ensure the competent administration of ether and to prevent its misuse or abuse, as well as to recoup the expenditures of its development. Morton's pursuit of credit for and profit from the administration of ether was complicated by the furtive and sometimes deceptive tactics he employed during its development, as well as the competing claims of other doctors, most notably his former mentor, Dr. Jackson. Morton's own efforts to obtain patents overseas also undermined his assertions of philanthropic intent. Consequently, no effort was made to enforce the patent, and ether soon came into general use.

In December 1846, Morton applied to Congress for "national recompense" of $100,000, but this too was complicated by the claims of Jackson and Wells as discoverers of ether, and so Morton's application proved fruitless. He made similar applications in 1849, 1851, and 1853, and all failed. He later sought remuneration for his achievement through a futile attempt to sue the United States government. The lawyer who represented him was Richard Henry Dana, Jr.

In 1852 he received an honorary degree from the Washington University of Medicine in Baltimore, which later became the College of Physicians and Surgeons.

In the spring of 1857, Amos Lawrence, a wealthy Bostonian, together with the medical professionals and influential citizens of Boston, developed a plan to raise $100,000 as a national testimonial to Morton, receiving contributions from both public and private citizens.

Morton's notoriety only increased when he served as the star defense witness in one of the most notable trials of the nineteenth century, that of John White Webster who had been accused of the murder of Dr. George Parkman. Morton's rival, Dr. Jackson, testified for the prosecution, and the residents of Boston were anxious to witness these nemeses in courtroom combat.

Morton performed public service yet again in the autumn of 1862 when he joined the Army of the Potomac as a volunteer surgeon, and applied ether to more than two thousand wounded soldiers during the battles of Fredericksburg, Chancellorsville, and the Wilderness.

Morton was in New York City in July 1868 when he went to Central Park to seek relief from a heat wave, where he collapsed and died soon after. He is buried at Mount Auburn Cemetery in Watertown and Cambridge, Massachusetts.

In 1871, a committee of those involved in raising the aforementioned national testimonial published The Historical Memoranda Relative to the Discovery of Etherization to establish Morton as the inventor and revealer of anesthetic inhalation and to justify pecuniary reward to Morton's family for the "fearful moral and legal responsibility he assumed in pursuit of this discovery".

Morton's life and work were later to become the subject of the 1944 Paramount Pictures film The Great Moment.

The first use of ether as an anesthetic is commemorated in the Ether Monument in the Boston Public Garden, but the designers were careful not to choose sides in the debate over who should deserve credit for the discovery. Instead, the statue depicts a doctor in medieval Moorish robes and turban.

Morton's first successful public demonstration of ether as an inhalation anesthetic was such an historic and widely publicized event that many consider him to be the "inventor and revealer" of anesthesia. However, Morton's work was preceded by that of Georgia surgeon Crawford Williamson Long, who employed ether as an anesthetic on March 30, 1842. Although Long demonstrated its use to physicians in Georgia on numerous occasions, he did not publish his findings until 1849, in The Southern Medical and Surgical Journal. These pioneering uses of ether were key factors in the medical and scientific pursuit now referred to as anesthesiology, and allowed the development of modern surgery. Spread of the news of this "new" anesthetic was helped by the subsequent feud that developed between Morton and Horace Wells and Charles T. Jackson.