With the outbreak of the American Civil War in April 1861, Gregory took a temporary commission in the United States Navy and was given command of the brig USS Bohio.

Bohio under Gregory's command took a number of prizes, the most remarkable example of which involved a ruse to disguise his vessel as a steamship in order to deceive the enemy into surrendering.

[6][non-primary source needed] While still in his early twenties, he supervised the construction of the clipper ship Sunny South, built in 1850, which his older brother Michael would captain.

[13] At midnight, Tejuca shipped a sea which rolled the vessel almost on her beam ends, broke most of the yards, and destroyed or swept away everything on deck including the lifeboats, the seawater also contaminating the crew's food stores and drinking water.

[14] Following the loss of Tejuca, Gregory assumed command in 1857 of the 360-ton bark Albers,[2] built in Topsham, Massachusetts, in 1844, and owned by Bush & Wilder of Boston.

[15] Taking charge of the vessel at that city, Gregory sailed her to Charleston, South Carolina, then to Buenos Aires, Argentina; Montevideo, Uruguay; and Patagonia, before returning to Baltimore.

[16] His next port of call with Albers was Whampoa, "where he was violently ill",[16] but after recovering he took the vessel on to Canton and Swatow, when she was again sold, with Gregory again remaining in command.

[17] While sharing a meal with the new owner of Albers at the latter's residence, Gregory received word that the crew were running wild aboard ship.

[17]Not long after Gregory's return to the United States, his employers, Bush & Wilder, purchased a new ship for him to take on another voyage to China.

To address the critical shortage of personnel, the Navy created temporary commissions, enabling volunteers from the merchant marine to become naval officers with little or no additional training.

After making inquiries, William and Samuel discovered that some political opponents in their home town of Marblehead had preferred charges of disloyalty against them to the Secretary of the Navy, Gideon Welles.

[18] Returning home, the two brothers organized "a large and enthusiastic meeting"[18] of the town's residents at Lyceum Hall, where resolutions were adopted condemning the charges against the two as false, and expressing confidence in their loyalty to the nation.

On catching the vessel, she was discovered to be the Confederate schooner Eugenie Smith, bound for Matamoras from Havana, Cuba,[b] with a "valuable cargo"[20] of coffee, soap, dry goods and other items.

Here, Gregory received intelligence that a "suspicious-looking" schooner flying the British flag had been recently hailed in the vicinity by a US Navy ship, but allowed to proceed because her papers seemed to be in order.

Sand was placed in the bottom barrel to protect the deck, and a fire was then started in the stovepipe "with bits of rope, old junk, tar and other materials"[22] to create smoke.

[16] He eventually returned home as mate aboard the mammoth clipper Great Republic, as he was unable to secure a command of his own due to the exigencies of the war.