Matsell was born in New York City to George Joshua Matsell, an immigrant from Walsingham, Norfolk, England. He worked as an apprentice in his father's bookstore on Broadway during his childhood, eventually opening a bookstore of his own on Chatham Street after spending several years as a sailor. His bookstore became notorious for carrying the works of Freethinkers such as Thomas Paine, as well as spiritualists, attracting an educated clientele and making him prosperous. He married Ellen Miriam Barrett on April 6, 1834. He became a police magistrate in 1840. In later years his enemies claimed he was born in England, and immigrated at age 5-6; he claimed to be born in 1807.

Observing that the city had long since outgrown the outdated city guard system, Matsell began organizing regular night patrols throughout the city, especially along the New York riverfront, where they made several arrests and were successful in preventing criminal activities. Matsell's efforts would soon influence police reforms which would not only be adopted in New York with the passage of the Municipal Police Act in 1844, but throughout the United States as well.

Under the act, police departments were given a larger responsibility over the city and New York Mayor William Frederick Havemeyer would soon promote Matsell as police chief of the newly created New York City Police Department. Among the new reforms under Matsell's administration, patrol methods were improved and a strict discipline instilled, the results of which would be seen during the Astor Place Riots of 1849 and common violence seen during between Nativist and Tammany supporters during New York's political elections. Matsell would also seek to establish a special police division to patrol the cities river and waterfront areas, with property values at an estimated $350 million ($11.4 billion in present-day terms), to protect against the numerous river pirates of the period.

In 1857, the Metropolitan Police Act was passed by the state legislature in favor of the previous Municipal Police Act over a decade earlier and allowed the establishment of a police commission to oversee the New York's law enforcement. In the ensuing battle for control of the NYPD however, Matsell was forced to resign his position as the commission assumed administrative control. See New York City Police Riot. In 1859 he was the author of Vocabulum, or, The rogue's lexicon: compiled from the most authentic sources, a dictionary of American thieves' cant.

In 1866, George Wilkes and Enoch Camp sold the National Police Gazette to Matsell.

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