The first Valley campaign started with Grant's planned invasion of the Shenandoah Valley. Grant ordered Major General Franz Sigel to move "up the Valley" (i.e., southwest to the higher elevations) with 10,000 men to destroy the Confederate railroad, hospital and supply center at Lynchburg, Virginia. Sigel was intercepted and defeated by 4,000 troops and cadets from the Virginia Military Institute under Confederate Maj. Gen. John C. Breckinridge. His forces retreated to Strasburg, Virginia. Maj. Gen. David Hunter replaced Sigel and resumed the Union offensive and defeated William E. "Grumble" Jones at the Battle of the Piedmont. Jones died in the battle, and Hunter occupied Staunton, Virginia. Confederate Gen. Jubal A. Early and his troops arrived in Lynchburg on June 17 at 1 p.m. Although Hunter had planned to destroy railroads and hospitals in Lynchburg, and the James River Canal, when Early's initial units arrived, Hunter thought his forces outnumbered. Hunter, short on supplies, retreated back through West Virginia.

General Robert E. Lee was concerned about Hunter's advances in the Valley, which threatened critical railroad lines and provisions for the Virginia-based Confederate forces. He sent Jubal Early's corps to sweep Union forces from the Valley and, if possible, to menace Washington, D.C., hoping to compel Grant to dilute his forces against Lee around Petersburg, Virginia. Early got off to a good start. He drove downriver through the Valley without opposition, bypassed Harpers Ferry, crossed the Potomac River, and advanced into Maryland. Grant dispatched a corps under Horatio G. Wright and other troops under George Crook to reinforce Washington and pursue Early.

Grant finally lost patience with Hunter, particularly his allowing Early to burn Chambersburg, and knew that Washington remained vulnerable if Early was still on the loose. He found a new commander aggressive enough to defeat Early: Philip Sheridan, the cavalry commander of the Army of the Potomac, who was given command of all forces in the area, calling them the Army of the Shenandoah. Sheridan initially started slowly, primarily because the impending presidential election of 1864 demanded a cautious approach, avoiding any disaster that might lead to the defeat of Abraham Lincoln.

After his missions of neutralizing Early and suppressing the Valley's military-related economy, Sheridan returned to assist Grant at Petersburg. Most of the men of Early's corps rejoined Lee at Petersburg in December, while Early remained in the Valley to command a skeleton force. He was defeated at the Battle of Waynesboro on March 2, 1865, after which Lee removed him from his command, because the Confederate government and people had lost confidence in him.