When the University of Vermont was incorporated by the state legislature on November 3, 1791, its nondenominational charter was the first in the country to specify clearly that the rules, regulations, and bylaws shall not tend to give preference to any religious sect or denomination whatsoever. Although the trustees were granted broad governing powers, they waited almost a decade before they established the new institution in Burlington. It was not until October 17, 1800, at a meeting chaired by Governor Tichenor, that the corporation elected Daniel Clarke Sanders to serve as the first president of the university.

Daniel Sanders was born in Sturbridge, Massachusetts, on May 3, 1768. He graduated from Harvard College in 1788 before receiving his license to preach in 1790. He went on to obtain a master's degree from Harvard in 1791, and in May 1792, he began to preach in Vergennes, Vermont, where he met and married Nancy Fitch, a native of Canterbury, Connecticut. They had a family of eight children, five of whom later died in the Vermont epidemic of 1812–13. In June 1794, Sanders was ordained as the pastor of the Vergennes Congregational Church at an annual salary of four hundred dollars, then the largest salary in Vermont.

Unfortunately, the Reverend Mr. Sanders never received his full salary, and he left Vergennes in 1799 to accept an invitation to be a Congregational preacher in Burlington while also establishing a preparatory academy. His primary reason for coming was, to quote his own words, to get into operation the University of Vermont. In 1794 the trustees had authorized the construction of UVM's first building — a president's house (later known as the Old Yellow House). In October 1799, the corporation voted that Sanders could have use of this house and fifty acres of adjoining land. During this period, the citizens of Burlington pledged $2,310 to create a brick edifice and procure a library and philosophical apparatus for the university. This was a remarkable sum, considering that the census listed only 816 total residents in the town at this time. One year later, when Sanders was elected president, his salary was set at six hundred dollars a year, together with the house (which was also a student dormitory), plus the four hundred dollars he earned from the Burlington church.

When the first class of four students enrolled at UVM in 1800, Sanders faced a formidable challenge. As Professor Julian Lindsay explains in his early history of UVM, During the first years of the University's life, Daniel Clarke Sanders was Praeses, Curator, Secretarius, Bibliothecarius, and Professor, to which should be added eruditus. The campus consisted of fifty acres of woods 277 feet above Lake Champlain with no road running through it. In addition to felling very large pine trees to help clear ten acres for the college site, Sanders served as the entire faculty for seven years. During this period, he taught Latin and Greek, chemistry and mineralogy, anatomy, surgery, and belles-lettres, involving up to ten hours a day in personal recitations. He also catalogued the university's first library, consisting of thirty-one volumes, and helped plan the construction of the first college edifice. All of this time he continued to serve as pastor of his Burlington church.

The first class of four students, who each paid a tuition of twelve dollars a year, graduated in 1804. In 1806 the College Edifice was completed at a cost of more than twenty-four thousand dollars. It was four stories high and 160 feet long, containing a chapel, seven large public rooms, and forty-five chambers for students. The new astronomical and philosophical apparatus included two twenty-four-inch globes, a telescope, planetarium, quadrants, and additional instruments worth seven hundred dollars. A new subscription of five thousand dollars was raised, chiefly from the loyal citizens of Burlington, to help defray these costs.

During the next five years, the fledgling university continued to grow. The corporation adopted an official seal in 1807. This same year James Dean, a graduate of Dartmouth, was named as a tutor, and two years later he was elected as UVM's first full professor in mathematics and natural philosophy. In 1811 the playwright and jurist, Royall Tyler, was appointed professor of jurisprudence, while also serving as chief justice of the Vermont Supreme Court, and the Rev. Jason Chamberlain was appointed professor of Greek and Latin. President Sanders continued to teach and write. In 1809 he was awarded an honorary doctor of divinity degree by Harvard, and in 1812 his major scholarly study, A History of the Indian Wars, was published.

More than 120 students attended UVM from 1800 to 1814 during Daniel Sanders' tenure as president. Two graduates in the class of 1810 were Jacob Collamer, later United States senator, and Timothy Follett, the first president of the Rutland and Burlington Railroad. Despite such progress, the university faced chronic financial troubles due in large part to the depressed economy caused by the Embargo Act of 1807, which cut off trade with Canada and led to the War of 1812. UVM turned to the state for help in 1810, when the charter was revised to provide for the election of eighteen trustees by the legislature. There is no evidence, however, that state appropriations were forthcoming. As a result, the corporation retained the annual tuition fee of $12.00, but in 1811 students were also charged $.50 a year for their rooms, plus $1.42 a week for board. Apparently the students ate a starchy diet, because in 1813 the board charge was again raised to $1.75 a week, with the proviso that it would be reduced to $1.50 if the price of wheat after harvest should not exceed $1.50 a bushel.

During the War of 1812, Burlington became headquarters for the northern department of the United States Army. More than four thousand troops jammed into the town and constructed a battery on the high bluff overlooking Lake Champlain. The next two years were a period of crisis for both the university and President Sanders. Five of his children died in an epidemic that started among the soldiers in 1812–13. In January 1814, Ira Allen, the flamboyant and controversial entrepreneur and land speculator who had founded the university, died bankrupt in Philadelphia. The College Edifice in Burlington was seized by the government and turned into an army barracks. Instruction was suspended, and President Sanders was forced to dismiss the students and send them off to other colleges after his own contract was terminated. Despite his incredibly energetic work on behalf of the university, he left with the blessing of some of the trustees who, according to Lindsay, objected to his Unitarianism and laxity in prayers.

In 1815 Sanders was installed as pastor of the Congregational Church in Medfield, Massachusetts, a position he held until 1829. He later served in the Massachusetts legislature and continued to preach until illness made his later years difficult. He died at the age of eighty-two on October 18, 1850, almost fifty years after the day he was installed as the first president of the University of Vermont.