Believing that Early’s army was no longer a threat in the Valley, Maj. Gen. Horatio Wright abandoned his pursuit and ordered the VI and XIX Corps to return to Washington, where they were to be sent to Grant’s “army group” before Petersburg. Wright left Brig. Gen. George Crook with three divisions and some cavalry to hold Winchester. Under orders to prevent reinforcements from being sent to Grant, Early marched north on July 24 against Crook. After an hour of stubborn resistance at Pritchard’s Hill, the Federal line collapsed and Crook’s divisions streamed back in disarray through the streets of Winchester. Col. James Mulligan commanding Crook’s 3rd Division was mortally wounded. Rutherford B. Hayes commanded a brigade against John C. Breckinridge’s wing. Crook retreated to the Potomac River and crossed near Williamsport on July 26. As a result of this defeat and the burning of Chambersburg, Pennsylvania, on July 30, Grant returned the VI and XIX Corps and appointed Sheridan as commander of Union forces in the Valley.

Late in the afternoon on July 24, 1864, 1,800 Union soldiers led by Colonel James A. Mulligan fell back to this lane. Major General John B. Gordon's Confederate force attacked from the ground beyond Opequon Church. Mulligan held off Gordon briefly, but Confederate Major General John C. Breckinridge's devastating flank attack struck the Irishman from the east side of the Valley Pike. Breckinridge, a former U.S. Vice President, personally led his men forward. One soldiers deemed him, "the bravest man I ever saw." To the west, sharpshooters from Major General Stephen D. Ramseur's Confederate command attacked Mulligan's right flank, a short distance beyond the wheelwright shop.

As the Union battle line crumbled, Mulligan rode up behind his old Irish Brigade, the 23rd Illinois Infantry, "Never did he look better," recalled one of the soldiers, "his penetrating eyes flashing as he beheld his brigade, the last in yielding to the pressure of the enemy." With Confederates closing in from all sides, Mulligan ordered a fighting withdrawal. When he rose up in his saddle to cheer his men on, Confederate sharpshooters concealed in the streambed hit Mulligan. As his dedicated soldiers rushed to his side, two more bullets struck him in rapid secession. The sharpshooters also killed Lt. James Nugent, Mulligan's 19-year-old brother-in-law, who had been holding the regimental colors.

Mulligan's soldiers attempted to carry him from the field, but many fell under the blistering Confederate musketry. Mulligan saw the heavy losses his men were enduring and ordered "Lay me down and save the flag." Mulligan's men complied. Confederate soldiers later carried the mortally wounded Mulligan into the Pritchard House where he died two days later.

The victorious Confederates swept up Pritchard's Hill and through Winchester, driving back the entire Union army in confusion to Bunker Hill, West Virginia. The Union army lost 1,200 men, while Early suffered only 200 casualties. A Virginia veteran summed up the Second Battle of Kernstown as "the most easily won battle of the war."

Considered a reluctant Confederate, Breckinridge served as the U.S. Vice President from 1857 to 1861 and was a presidential candidate in 1860. In the turbulent summer of 1861, he retained a seat in Congress as Senator from Kentucky, attempting to reconcile the fractured nation. Only when Kentucky Unionists plotted Breckinridge's arrest in the fall of 1861, did he join the Confederate army.

Mulligan was a charismatic Irish-American attorney from Chicago, Illinois, who raised "Mulligan's Irish Brigade" for the Union cause in 1861. While he fought in the Valley in 1864, his pregnant wife and their two young daughters remained in Cumberland, Maryland, waiting for his return. Upon learning of Mulligan's wounding at Kernstown, his wife hurried to Winchester to care for her husband, but he died before she arrived.