The politics of 19th Century America were drastically divided along sectional lines. The southern states had a smaller population and relied heavily on slavery for their economy and their way of life. The northern states were more populous, more industrial, and a larger proportion of the people were against slavery. While not all northerners were abolitionists, most did not want slavery to expand into the western territories.
By 1820 the number of slave states matched the number of free states, so the senate was equally represented. When Missouri wanted to join the Union as a slave state, this balance would be lost, and the slave-holding states would have more power than the north, allowing the possibility that slavery would spread into previously free land. In addition, Missouri would be the most northern slave state, which threatened the free north states.
To resolve the debate, a senator from Kentucky, Henry Clay, who would later be known as the Great Compromiser, proposed a solution. From that point forward states would enter two at a time, one slave, one free, to keep the balance in the senate. To allow Missouri to join, Maine would join as a free state. To limit the spread of slavery, Missouri would be allowed to enter the Union as a slave state, but west of Missouri the furthest north slavery would be allowed was the line 36°30', which is the southern border of Missouri, or the northern border of Arkansas. The line stretched west only as far as the western edge of Arkansas1, as at this time, the land west and south of this point was in the possession of New Spain2.
The Missouri Compromise was overturned by the Kansas Nebraska Act in 1854. The Act was proposed by the Illinois senator Stephen Douglas, who wanted to see the proposed transcontinental railroad built in the north, connecting Chicago with the east and west. The southern politicians wanted the railroad to reach from New Orleans to southern California. In exchange for the southern politicians' support, Douglas introduced the Kansas Nebraska Act. This Act would organise the territories of Kansas and Nebraska and allow the residents to decide whether the territories would become free or slave states when they applied for statehood. This idea had been proposed in the Compromise of 1850 with regards to the New Mexico territory, and was now referred to as 'popular sovereignty'. Douglas believed that the two territories would eventually enter the United States as free states, as the land was not conducive to typical southern slave plantations. He was eventually proven right, but not until after Kansas was inundated by pro-slavery 'border ruffians', who deliberately moved to Kansas specifically to vote in the coming referendum. Anti-slavery 'Free-Staters' opposed the border ruffians in a series of incidents that became known as 'Bloody Kansas', 'Bleeding Kansas', or the 'Border War'. Nebraska became a free state after the Civil War.
The Missouri Compromise was the first precedent allowing for congress to stipulate the designation (free or slave) of territory gained since the adoption of the Constitution. Previous to this there had been debate as to whether the federal government was constitutionally allowed to ban slavery in areas of the country which had not existed when the Constitution was written. Slave-holders felt that the government could not ban slavery in federal territories because that would be tantamount to depriving citizens of their property (slaves), which was unconstitutional. The Missouri Compromise also established that the policy of prospective states3 could not be dictated by the federal government.