The odd thing is that no one seems to have a good idea why. Even the Indiana State Library doesn’t offer an origin.
However, one theory from the Indiana Historical Bureau is that there was a contractor named Thomas Hoosier who was employed on the Louisville and Portland Canal. For some reason, he really liked to hire men from Indiana, who were, among Hoosier’s cohorts, referred to as “Hoosier’s men.” Eventually it caught on.
Any other ideas you’ve heard?