Originally a Democrat, Underwood's antislavery views caused him to join the new Republican Party when it was founded.

[2] Underwood studied law with Luke P. Poland in Morrisville, attained admission to the bar in 1842, and moved to Burlington.

[2] In addition to practicing law, he was also involved in several businesses, including serving as a director and president of the Bank of Burlington.

[4] Underwood became active in politics as a member of the Democratic Party,[5] and he served in local offices including justice of the peace.

[11] In addition, he was appointed to the committee that drafted the senate's response to the portion of the governor's annual message pertaining to the issue of slavery.

[13] In the September general election, Underwood defeated the Democratic nominee, Stephen Thomas, by a wide margin.

[14] He began his term in October 1861, and at the end of the legislative session in December, senators unanimously commended him for the tact and fairness he displayed as their presiding officer.

[15] In early 1861, Underwood was appointed with Hiland Hall, Horace Henry Baxter, Lucius E. Chittenden, and Broughton Harris as Vermont's delegates to the Peace Conference of 1861, which unsuccessfully attempted to prevent the start of the American Civil War.

[16] After the war started, Underwood presided over the senate during its April 1861 session, at which the Vermont General Assembly and governor enacted measures to reorganize, equip, and train the state militia, and appropriate funds for these purposes.

[17] During the war, Underwood took part in pro-Union measures, including subscriptions to raise money for equipping Vermonters who volunteered for military service[18] and reviewing troops at mobilization sites prior to their departure for the front lines.

[21] At the end of the 1861 legislative session in September, senators again unanimously passed a resolution commending Underwood for his performance as their presiding officer.

[32] During the American Civil War, the area in Burlington's Old North End which was known as the fairgrounds became the site of a military encampment for organizing and training Vermont units raised for the Union Army.