Sully was commissioned colonel of the 1st Minnesota Volunteer Infantry on February 3, 1862. He led his regiment during the Peninsula Campaign, sustaining a minor wound at Glendale. Sully was promoted to brigadier general on September 26 and led a brigade in the II Corps during the Battle of Fredericksburg, but on May 1, 1863, was removed from command by his division commander, Brig. Gen John Gibbon after failing to suppress a mutiny by the 34th New York when several of its companies refused to fight on the grounds that their two-year enlistment term was about to expire. Gibbon attempted to have Sully court-martialed for dereliction of duty, although a court of inquiry found him innocent of these charges, he was removed from command of his brigade and exiled to the Great Plains, never to serve in the Civil War again.