When asked that question, I suspect most Americans would say “in New York.” If so, they would be wrong. A 1998 United States Supreme Court decision found that most of the island is in New Jersey.
According to Wikipedia’s article, New Jersey v. New York, at https://en.wikipedia.org/wiki/New_Jersey_v._New_York:
An interstate compact had been signed between New York and New Jersey prior to Ellis Island becoming a major immigration center. This compact granted New York the rights to all islands in the water channel separating the two states (including both Ellis Island and the much larger Staten Island), but granting New Jersey the rights to half of the water channel. This agreement was fashioned in order to allow New Jersey to build docks on the riverfront, while allowing New York to control islands that it already considered integral parts of its territory. This led to places such as Ellis Island located on the New Jersey half of the river, but belonging to New York.
Later, Ellis Island was expanded through land reclamation and soon became a major center for immigrants coming from Europe to the New World. This land was added by New York and operated by New York for decades before New Jersey brought its lawsuit. Since the land added by New York was not expressly granted to New York by the interstate compact, and was placed in water that had been expressly granted to New Jersey, the majority ruled that this “new” land (decades old by this time) must belong to New Jersey. The dissent used historical reasons and “common-sense inference” as their basis for supporting New York’s claim.
According to the court decision, all land originally given to New York by the compact (the original, natural Ellis Island) remains under the jurisdiction of New York, but any and all land reclaimed from the waters after that point is under the jurisdiction of New Jersey. The island covers a land area of 27.5 acres (11.1 ha).
The two states jointly negotiated a post-trial settlement to decide exactly where and how to draw the lines in accordance with the Supreme Court decision. The 2.74-acre (1.11 ha) original island and other areas negotiated in that post-trial settlement, totaling 3.3 acres (1.3 ha), to this day remains part of New York that is a landlocked enclave within New Jersey. The case is possibly the first to use GIS in determining a Supreme Court decision.
While the court decision has changed the state control and jurisdiction of most parts of the island, the actual current landowner (holder of the title of Ellis Island) is the federal government. Very few activities on the island were directly affected by the transfer of sovereignty, but the decision did affect some instances of sales taxes, and may well play an influential role in shaping future developments and maintenance of the island.
You can read more in a New York Times article published May 27, 1998, at http://goo.gl/cxeNWW.