Shipwreck hunters Jim Kennard and Roger Pawlowski found the ship in several hundred feet of water off Fair Haven, New York.
The ship, carrying a load of general goods bound for Cleveland and Toledo, Ohio, broke apart and sank in a gale on November 4, 1862, leading to the the deaths of all aboard -- at least 21 people, according to contemporaneous newspaper accounts archived by the Maritime History of the Great Lakes website
They discovered the ship while hunting for wrecks in August, Kennard wrote in an account of the discovery on his website, Shipwreck World
The wreck was too deep to send recreational divers, so they used a remotely operated vehicle to explore the site, discovering extensive damage to the ship, which was built in 1852.
"The entire top structure of the shipwreck was missing," Kennard wrote. "Only the remains of a rail or what may have been framing are left standing mainly in the bow and stern while other portions are lying on the deck of the shipwreck."
The ROV got stuck on the wreckage, and the team had to send a deep-water diver to the wreck to retrieve it, according to his Shipwreck World account.
According to Kennard, the discovery appears to show that the ship's captain tried to turn back to Oswego after high winds prevented him from making further progress.
"This was the beginning of the end as the Bay State was starting to come apart depositing parts of the ship on the bottom of the lake," Kennard wrote.
The ship shed parts for a quarter of a mile as it steamed toward Oswego, New York, and then sank, Kennard said.
Later, pieces of the ship and some of its cargo washed ashore near Oswego, Kennard said.
"Cart loads of these goods were gathered up by eager residents and quickly carried away," he wrote.
The shipwreck is the earliest examples yet found of a propeller-driven steamship on the Great Lakes.
A ship called the Vandalia out of Oswego is widely credited as the first propeller-driven steamship on the Great Lakes in 1841.