Pegram was promoted to brigadier general in November 1862 and given command of a cavalry brigade. His performance before the Battle of Stones River in December was criticized by his superiors for failing to provide proper intelligence on enemy movements. In March 1863, he led an ill-fated raid into Kentucky that was defeated at the Battle of Somerset and drew criticism from his subordinate officers, including John Hunt Morgan. He remained in command, however, and was ordered to report to the Army of Northern Virginia in October after he requested reassignment back to the Eastern Theater. However, before leaving, Pegram and his division fought under Nathan Bedford Forrest at the Battle of Chickamauga.