There is an entertaining fable about a horse and the tiny steam engine which has been told and repeated over the years. There is no evidence this August 1830 race ever happened - the one contemporaneous record (see below) did not mention a race.
But this idea isn't far-fetched. There was an American trotter horse named "Tom Thumb" that raced in various challenges and contests that year, and in May 1830 the first steam engine was called the "Tom Thumb of Steam Engines" after the horse. The story about the August 28, 1830 race was first told in 1868 in a celebratory speech made by John H.B. Latrobe, the long-time attorney for the B&O.
Something as fanciful as this race would have had a contemporaneous newspaper mention, but none could be found. However, in a biography on Peter Cooper published in 1886, 3 years after the death of Mr. Cooper, it was claimed such an informal race actually occurred on September 28, 1830 - about a month after the Tom Thumb was first used, but again there are no contemporaneous accounts. See the account for yourself below (excerpt from Life and Times of Peter Cooper). Note that in autobiographical material from Peter Cooper himself, there was no mention of the term "Tom Thumb" or the fabled race.
For now, here is the story as it appears on the Federal Highway Administration website along with the painting by Carl Rakeman on the right:
The race on August 28, 1830, between Peter Cooper's diminutive Tom Thumb locomotive and the horse-drawn Baltimore and Ohio (B&O) Railroad car demonstrated the superiority of steam power. Though the gallant horse won eventually when mechanical failure stopped the locomotive, the Tom Thumb had led the race, rounding curves at 15 miles an hour.
The B&O, America's first common carrier railroad, was organized when Baltimore began to lose business to New York's Erie Canal. Because steam locomotives were experimental, the B&O intended to use horses. But failure to make expenses, and the lack of success of wind-driven sailing cars and horse-powered treadmill cars, opened the way for Peter Cooper's plan for steam power.
All horses on the B&O Railroad were replaced by steam locomotives on July 31, 1831.
Image above: Daily national intelligencer Tuesday, Apr 13, 1830 Washington (DC), DC
Image above: Philadelphia Inquirer Wednesday, Apr 07, 1830 Philadelphia, PA
Image above: Charleston_Courier_1830-05-15_2
Image above: The Philadelphia Inquirer (Philadelphia, Pennsylvania) Thu, Aug 26, 1830