Lieutenant Waddell resigned his commission while returning home in the latter ship late in 1861 at the outbreak of the American Civil War and was dismissed from the U.S. Navy in January 1862.

The next month, while serving as an artillery officer ashore, he participated in the battle between Confederate shore batteries and Federal ironclads at Drewry's Bluff, Virginia.

[citation needed] On June 27, 1865, he learned from a prize, the Susan & Abigail, that General Robert E. Lee had surrendered his Army of Northern Virginia.

Her captain produced a San Francisco newspaper reporting the flight from Richmond, Virginia, of the Confederate Government 10 weeks previously.

On August 3, 1865, Waddell finally learned of the war's end when he met at sea the Liverpool barque Barracouta, which was bound for San Francisco.

The banner was lowered in front of the crew and of a Royal Navy detachment who had boarded the vessel - this marked the last surrender of the American Civil War.