He participated in the first battle of Bull Run and the preceding outpost skirmishes, and in September, 1861 was commissioned by Governor Letcher as lieutenant-colonel of the Fourth Virginia cavalry. On May 4, 1862, he received a severe saber wound in a cavalry charge at Williamsburg. This prevented him from participating in the battles around Richmond and while still wounded he was taken prisoner at his home on McClellan's advance, but was paroled and promptly exchanged by special cartel for his wife's relative, Lieut. Col. Thomas L. Kane, of the Pennsylvania Bucktails. In August, 1862, he was commissioned colonel of the Fourth Virginia cavalry, and in that rank he participated in the battles of Second Bull Run, Boonsboro, Sharpsburg and the frequent engagements of the cavalry under General Stuart. During the advance of the army of the Potomac into Virginia, after the battle of Sharpsburg, he was again wounded, this time in his neck by a shell fragment, while in temporary command of Fitzhugh Lee's brigade at Upperville. Recovering from this wound, he regained his command in time to take part in the battle of Fredericksburg on December 12, 1862. After the army went into winter quarters, he was on the picket lines on the Rappahannock River in the Fredericksburg area when Burnside made his unsuccessful attempt to cross the river again. In the spring of 1863, he and his command were actively engaged in the outpost conflicts preceding the battle of Chancellorsville, and was posted on the right flank during that battle. Prior to the opening of the campaign in 1863, while in command of his regiment at the front, he announced himself a candidate for the Confederate Congress from the Richmond district, and without going into the district was elected shortly after the battle of Chancellorsville by a significant majority. However, he remained at his post in the army, leaving his seat in Congress vacant until the autumn of 1864. During the fateful Confederate advance into Pennsylvania, Williams' command formed a part of the force which Stuart took on his raid around Meade's army, rejoining the army of Northern Virginia on the eve of the battle of Gettysburg. During this decisive battle that was the turning point of the war, his command was posted on the extreme left flank and aided in covering the retreat.

On September 9, 1863, he was commissioned brigadier-general, and put in command of Wickham's brigade of Fitzhugh Lee's division. The cavalry of both armies had frequent encounters during the following months, with the engagements at Bristoe, Brandy Station and Buckland Mills being the most serious until February, 1864, when the fighting to repel Kilpatrick's raid upon Richmond, and Custer's attack on Charlottesville was very desperate. In March and April of 1864, Williams and his brigade were again on guard on the Rapidan and Rappahannock rivers. He took part in the battles of the Wilderness and Spottsylvania Court House, and when Sheridan moved on Richmond, he was with Stuart on May 11 at Yellow Tavern. "Order Wickham to dismount his brigade and attack," was the last order given by a mortally wounded General Stuart to a brigade of cavalry (see historic marker). Subsequently Williams participated in the battles of Totopotomay, Cold Harbor, Trevilian's, Reams' Station and numerous lesser cavalry engagements. On August 10, 1864, he and his command were ordered from the south side of the James River to join Early's army in the Valley of Virginia, with Fitzhugh Lee being in command of the cavalry corps with Williams in command of Lee's division. At the battle of Third Winchester on September 19, 1864, Williams covered the retreat. Rallying his men with great ability, General Early experienced another serious reverse at Fisher's Hill near Strasburg on September 22, and his army was saved from destruction by the successful defense of the Luray Valley at Milford (now Overall) by Lee's cavalry division under the command of Williams, which blocked the advance of General Torbert's corps, sent by Sheridan to intercept Early's retreat at New Market in the main valley. By preventing the entire annihilation of Early's army and possibly thwarting Sheridan's return to Grant's forces around Petersburg, Williams' determined stand at Milford is credited with single-handedly prolonging the life of the Confederacy. Among the Federal cavalry at the battle was George Armstrong Custer (soon to gain fame for Custer's Last Stand), who frustratingly acknowledged in his diary, "Johnnys in a strong position." Rejoining General Early at Brown's Gap, Williams was ordered to guard Rockfish Gap, and on arriving at the foot of the mountain attacked the Federal cavalry at Waynesboro and forced them to retreat down the valley, with the lines of the armies being established at Bridgewater. Williams resigned his commission in the Confederate army on October 5, 1864 and transferred his command to General Rosser. Having skillfully led his men in 59 engagements, Williams left the military a living legend. He then went to Richmond and took his seat in Congress as the session opened, with the pledge that he would "at once and assiduously work to bring about the termination of the blood strife being waged." Having concluded that the days of the Confederacy were numbered, he hoped for a while that a reunion could be arranged which would uphold the South's honor, while saving the lives of thousands of men and protecting some of their property from destruction. This effort, called the Hampton Roads Conference, was unsuccessful, so he continued at his post in Richmond, awaiting the inevitable.

After the surrender of the Confederacy, Williams focused on restoring friendly relations between the States, on reorganizing the labor necessary for the area's farming production, and on inducing Southerners to accept the situation. Despite the terrible condition of the South, Williams stood side by side with his neighbors and shared their fate. In the tradition of his grandfather John Wickham, Williams had been raised as a Whig and Federalist, so when the war ended he adopted the principles of the Republican party, which he regarded as the legitimate successor to the Whig party. On April 23, 1865, he announced his Republican affiliation in an open letter, something which estranged a good many of his old associates from him. In November of 1865, he was elected president of the Virginia Central railroad company. In 1868, it merged with the Covington & Ohio railroad to become the Chesapeake & Ohio (C&O) railroad company, with Williams remaining as president. The railroad had already received a contract to begin an ambitious expansion westward in August of 1865, with the goal being to link Richmond to the increasingly important coal fields of West Virginia. To achieve this goal, Williams secured the financial backing of Collis P. Huntington, the noted railway capitalist. Construction through the rugged West Virginia countryside began in 1869, with Huntington as president and Williams as vice president. In an era before modern construction equipment, progress was ponderous and challenging, with the total cost exceeding $23 million, a then staggering sum. The railroad construction project was a major source of employment for the newly freed slaves, but much of the hardest manual labor was performed by convicts from the Virginia State Penitentiary, who were leased to the railroad for 25 cents per day (about one fourth the going rate for free labor). Out of this, came the legend of John Henry, the giant, steel-driving railroad worker who beat a steam powered drill in a tunneling contest, but fatally exhausted himself while striving for victory. Wielding a 20-pound sledgehammer in each hand to defeat his mechanical adversary, he emerged triumphant from the tunnel, only to die from a burst heart in the arms of wife, who had warned him not to challenge the machine. The competition, which may be only a myth, is said to have occurred at the mile and half long Big Bend Tunnel at Talcott, West Virginia. Construction was finally completed on January 29, 1873, with Williams having the honor of driving the final spike at the Hawk's Nest bridge. Operational problems, including a massive rock slide in 1875 that blocked all traffic for three weeks, eventually caused the railroad to be sold under foreclosure and reorganized in 1878, with Huntington still as president and Williams as second vice president, a position he held for the rest of his life.

At C&O milepost 105.4 just north of Richmond stood the station of Wickham, which served Hickory Hill Plantation, where Williams lived (see the Big House). The railroad was used to transport the plantation's crops, mainly wheat, but also oats, corn, and assorted fruits and vegetables, into Richmond to command the best prices. There was a passenger facility at Wickham as late as 1948, but by 1963 all C&O facilities were gone. Hickory Hill Plantation (later known as Hickory Hill Farm), was the home of a branch of the Wickham family until 2007, when the big house and nearly 1,800 acres of the estate were sold off for $18 million. The property varied in size over the years, but remained almost entirely intact for more than a century after the Civil War, partly because Williams and his family had a deep and diversified pool of assets, greatly supplemented by the high incomes earned by Williams and his son Henry as C&O railroad executives, that allowed them to weather the lean years of the late 1800s. Their deep pockets also helped them avoid the share-cropping system so prevalent in other parts of the South. During the 1860s, the plantation consisted of sixteen different tracts amounting to 3,400 acres, the largest being South Wales (1,700 acres) and The Lane (972 acres), with the main grounds being located on the tract known as Hickory Hill (284 acres). 1,700 acres of the plantation had originally been owned by Robert Carter, Williams' maternal grandfather, but was given to his parents in 1820. His father moved the family there in 1827, retiring from law to manage the plantation full time. At its peak, the plantation had 275 workers, making it one of the ten largest operations in the state of Virginia. Operations were rather advanced, considering that a steam sawmill was built in 1849 and that the workers used reapers and threshers to harvest the crops. Because of its location just north of Richmond, the plantation saw a lot of action during the Civil War, with a portion of one engagement, the battle of Hanover Court House, being fought there on May 27, 1862. At other times, the sound of gunfire could be heard at all hours of the day, and the plantation frequently served as a refuge for wounded Confederate soldiers. During the summer of 1863, Union troops raided the plantation twice, and during one of the raids they captured General Robert E. Lee's son, Rooney Lee, who was married to Charlotte Wickham, a first cousin of Williams. Rooney was recuperating there from a serious thigh wound that he had received at the Battle of Brandy Station on June 9, 1863. His brother, Robert E. Lee, Jr., who was looking after him, narrowly escaped capture by hiding in the nearby boxwood garden. In 1875, the plantation house was rebuilt in the style of the day after a severe fire and in 1974 it was added to the National Register of Historical Places. The historic gardens include two ginkgo trees given to Williams by Commodore Mathew Perry, who had received them from the Emperor of Japan around 1853 (see tree). A portion of the plantation was donated to the black community to serve as the grounds for an educational facility.