After Castellano's death, Gallo–the only surviving member of the hierarchy–convened a three-man committee to temporarily run the family, comprising himself, Gotti and DeCicco. However, it was an open secret that Gotti was acting boss in all but name, and nearly all of the family's capos knew he had been the one behind the hit. Gotti was formally acclaimed as the new boss of the Gambino family at a meeting of 20 capos held on January 15, 1986. Gotti, in turn, selected DeCicco as his underboss and elevated Gravano to capo after Toddo Aurello announced his desire to step down.
On April 13, 1986, DeCicco was killed when his car was bombed following a visit to Castellano loyalist James Failla. The bombing was carried out by Victor Amuso and Anthony Casso of the Lucchese family, under orders of Vincent Gigante and Lucchese boss Anthony Corallo, to avenge Castellano and Bilotti by killing their successors; Gotti also planned to visit Failla that day, but canceled, and the bomb was detonated after a soldier who rode with DeCicco was mistaken for the boss. Bombs had long been banned by the Mafia out of concern that it would put innocent people in harm's way, leading the Gambinos to initially suspect that "zips"—Sicilian mafiosi working in the U.S.—were behind it; zips were well known for using bombs.
Gotti was imprisoned in May 1986 at the Metropolitan Correctional Center, New York, while awaiting trial on Racketeer Influenced and Corrupt Organizations Act (RICO) charges. He was forced to rely heavily on Gravano, Angelo Ruggiero, and Joseph "Piney" Armone to manage the family's day-to-day affairs while he called the major shots from his jail cell.
With Gotti's permission, Gravano set up the murders of Tommy Spero and several other Gambino associates. Eventually, Gotti would name Gravano his underboss, and move Locascio to consigliere. In 1986, Gotti underwent a racketeering trial. Jury selection for the racketeering case began again in August 1986, with Gotti standing trial alongside his brother Gene "Willie Boy" Johnson (who, despite being exposed as an informant, refused to turn state's evidence), Leonard DiMaria, Tony Rampino, Nicholas Corozzo and John Carneglia. At this point, the Gambinos were able to compromise the case when George Pape hid his friendship with Boško Radonjić and was empaneled as juror No. 11. Through Radonjić, Pape contacted Gravano and agreed to sell his vote on the jury for $60,000. On March 13, 1987, they acquitted Gotti and his codefendants of all charges. In the face of previous Mafia convictions, particularly the success of the Mafia Commission Trial, Gotti's acquittal was a major upset that further added to his reputation. The American media dubbed Gotti "The Teflon Don" in reference to the failure of any charges to "stick."