Defeated by John Gill Shorter in an 1861 bid for governor, Watts organized the 17th Regiment Alabama Infantry and led it at Pensacola and Corinth,[4] but resigned as its colonel to become the Confederacy's attorney general in President Jefferson Davis' cabinet.

Assuming office on December 1, he began an eighteen-month governorship that included impressment, tax-in-kind, and other severe wartime economic measures.

Worthless Confederate money, lack of credit possibilities, irregular supplies of goods, impressment efforts that often amounted to pillage and plunder, and harsh (and unevenly applied) taxes-in-kind levied on agriculture convinced many people that they preferred the "Old Union" to the "new despotism".

The legislature's failure to act meant that the state, and the Confederacy, would not have an effective militia in the final critical months of the war.

Governor Watts was aware of his ineffectiveness and unpopularity by this time and made no effort toward re-election, although he continued to talk optimistically about the military situation.