Reno was the senior officer serving under Custer at the Battle of the Little Bighorn in June 1876. Reno, with three troops, or companies, was to attack the Indian village from the south, while Custer with five troops intended to cross the Little Bighorn River farther north and come into the village from the opposite side; Custer ordered Captain Frederick Benteen with three troops to reconnoiter the areas south of the Sioux camp, and then return. Captain Thomas McDougall's troop was to escort the packtrain with ammunition and supplies. Historians believe the cavalry officers did not understand how large the village was. Estimates vary as to the size of the village (up to 10,000) and the number of warriors engaged. After visiting the battlefield, General Nelson Appleton Miles estimated that the number of "warriors did not exceed thirty-five hundred", while Captain Philo Clark, who interviewed a number of Indian survivors, "considered twenty-six hundred as the maximum number". Miles concluded, "At all events, they greatly outnumbered Custer's command."
After the Battle of the Little Bighorn, Reno was assigned command of Fort Abercrombie, Dakota Territory. There, in December 1876, he was charged with making unwanted advances toward the wife of another officer of the Seventh Cavalry, Captain James M. Bell, while Bell was away. A general court-martial hearing began in St. Paul on May 8, 1877. Reno was found guilty on six of seven charges against him, and ordered dismissed from the army. Later, President Rutherford B. Hayes reduced the dismissal sentence to two years.