She was named for Albert Gallatin (1761–1849), an American politician, diplomat, ethnologist, and linguist who served as the United States Secretary of the Treasury from 1801 to 1814.

Upon completion in April 1942, Albert Gallatin entered service in the United States Merchant Marine, initially operated by the American-Hawaiian Steamship Company.

Escorted by the United States Navy blimp K-34, she was on a northbound voyage in the Atlantic Ocean on 28 August 1943 when the German U-boat U-107, commanded by Kapitänleutnant Volker Simmermacher, attacked her 110 nautical miles (204 km; 127 mi) southeast of Savannah, Georgia, at 17:00.

[7] As Albert Gallatin began to sink, a Royal Air Force Bristol Blenheim aircraft arrived on the scene and dropped four bombs on I-26, inflicting minor damage on her.

[7][8] All on board — her crew of 43 merchant mariners and her 28-man United States Navy Armed Guard detachment — abandoned ship in her lifeboats.