Wordorigins.org

Dakota is another name for the Sioux Indian tribe. In the Santee dialect the name means allies. The Dakota Territory was organized in 1861 and named after the Indian tribe. Originally, it also encompassed much of what would eventually become Montana and Wyoming, but was reduced in size to the present territory of the Dakotas in 1863. In 1889, the Dakota Territory was split into North and South Dakota and admitted to the union as two states.

(Sources: Oxford English Dictionary, 2nd Edition; Illustrated Dictionary of Place Names; Webster’s Third New International Dictionary)