At the outbreak of the First World War in August 1914, Stephenson was based in the Admiralty, attached to the Naval Intelligence Division. However, he soon managed to obtain a seagoing role as executive officer of . He was involved in operations in the Dardanelles, and then commanded a fleet of naval trawlers undertaking patrols from Crete. He went on to command the gunboat and, (as an acting captain) the Otranto Barrage, a fleet of small boats which attempted to control the exit from the Adriatic Sea, particularly trying to prevent submarines of the Austro-Hungarian Navy breaking out into the Mediterranean. In this last role, he also undertook early experiments into the use of hydrophones to detect submarines. He was Mentioned in Despatches in December 1918, appointed a Companion of the Order of St Michael and St George in the 1919 New Year Honours, awarded the Greek decoration of Commander of the Order of the Redeemer for his service in the Mediterranean and Adriatic, and was also awarded the United States Navy Distinguished Service Medal.