The Dragoon was produced because of the problems seen with the fielded Colt Walker revolvers, namely, the Walker's heavy weight, four and a half pounds, making it suitable only for use as a saddle-mounted revolver, the Walker's propensity for cylinders exploding on occasion when fired (due to the chambers being loaded with too much powder often in combination with the Pickett bullets being loaded backwards), and the Walker's habit of dropping the loading lever upon discharge, locking up the revolver action in the middle of combat. The Colt Dragoon Revolver had a comparatively shorter cylinder (thus preventing overloading the cylinder) and held up to 50 grains of powder, whereas the Walker had used up to 60 grains of powder. The Dragoon Revolver had a shorter barrel at 7.5 inches (190 mm) (and on some later revolvers, 8 inches [200 mm]) as compared to the 9-inch (230 mm) barrel on the Walker. A loading lever latch in front of the lever replaced the spring to keep the lever from dropping during recoil, thereby preventing jamming of the revolver. These variations gave the Colt Dragoon Revolver a weight of 4 pounds 2 ounces (1.9 kg). These changes also reduced the risk of the Colt Dragoon Revolver exploding when fired, obviating the risk that had been demonstrated with the Walker revolvers.

In the events that led to the American Civil War, Colt Dragoons became extremely popular. In the beginning Colt Dragoon Revolvers were issued for the U.S. Army's Mounted Rifles. They were carried in pommel holsters on the saddle. The Colt Dragoon Revolver gained popularity among civilians in the Southwest where many had served in the Mexican–American War. The Dragoon became a master weapon for civilians who hailed it as a powerful weapon of the time.

Famous users included Joaquin Murietta, the California bandit, Charley Parkhurst, California teamster and stagecoach driver, James Douglas Byrd, Town Marshal, Watsonville, California, 1868, Tiburcio Vasquez, Union general George B McClellan, and fictional Augustus McCrae, in the novel Lonesome Dove, Mattie Ross in the novel True Grit and in the 2010 film (including the 1969 film of the same name) had Mattie Ross using a Colt Walker revolver, though John Wayne's character Rooster referred to it as a Colt's Dragoon. Charley Parkhurst, while driving freight, was confronted by two bandits whom he/she shot with the Colt Holster Pistol. According to Harper's Weekly, James Butler (Wild Bill Hickok) arrived in Springfield, Missouri carrying a Dragoon though it is generally accepted that he used a Colt 1851 Navy Revolver in his street duel with Davis Tutt.

The Dragoon is now a collectible arm and sells for high prices.

Non-firing replicas of the Colt 1848 Dragoon were manufactured at Denix in Spain. In 2005, a fire burned down the factory and destroyed the mold for the gun, which has since gone out of production. Denix has since reintroduced the non-firing model of the Colt 1848 Dragoon in nickel.

Quality replica Dragoons are currently produced by the Aldo Uberti Company of Brescia, Italy and distributed in the United States by Taylors, Inc.; Cimarron Firearms, and others. They are quite accurate and potentially more powerful than the belt sized revolvers of the same bore diameter. Velocities with .451–.457 inches (11.5–11.6 mm) round balls of approximately 141 grains over the full 50 grains of powder frequently show chronographed readings in the range of 1,000–1,100 feet per second (300–340 m/s), depending upon the powder used.

A cartridge-converted Colt Walker instead of the Colt Dragoon in the book was used in the 1969 film True Grit, as the weapon carried by 14-year-old Mattie, possibly due to the Walker's larger size. The Dragoon was used in the True Grit (2010) as in the original book. In Lonesome Dove, by Larry McMurtry, Captain Gus McCrae is armed with a Colt's Dragoon revolver. In the television adaptation, Gus is armed with a cartridge-converted Colt's Walker revolver.