In 1780, he was one of three men who captured Major John André, a British spy associated with the treason of Continental general and commandant of West Point Benedict Arnold.

André, seeing Paulding's Hessian coat, may have assumed him to be a soldiers of De Lancey's Brigade, a Loyalist military unit which had been raiding the Neutral Ground for cattle and supplies.

[5] The militiamen, all local yeomen farmers, refused André's attempt to bribe them, and delivered the officer to the Continental Army.

By an act of Congress, the new state of Ohio (1803) included the counties named Paulding, Van Wert (anglicized spelling), and Williams.

Paulding was held in particularly high regard by early American historians, as the standard 19th-century accounts credited him with the decision-making and initiative at the scene.

At his trial André insisted the men were mere brigands; sympathy for Andre remained among some more elite American quarters, which included some Loyalists.

Representative Benjamin Tallmadge of Connecticut, who had been present as an American officer in Westchester County in 1780 and had a low opinion of the three common militiamen, had accepted André's account of his capture and search.

[9] Some modern scholars have interpreted the episode as a major event in early American cultural development, representing the apotheosis of the "common man" in the new democratic society.

[11] Paulding's grave is marked by a large marble monument with the epitaph:[16] FIDELITY - On the morning of the 23rd of September 1780, accompanied by two young farmers of the county of West Chester, he intercepted the British spy, André.

Rejecting the temptation of great rewards, he conveyed his prisoner to the American camp and, by this noble act of self-denial, the treason of Arnold was detected; the designs of the enemy baffled; West Point and the American Army saved; and these United States, now by the grace of God Free and Independent, rescued from most imminent peril.In 1853, a monument was erected at the site of André's capture in Tarrytown.