In October, 1861, the Penguin joined the South Atlantic Blockading Squadron and in November participated in the capture of Fort Walker and Fort Beauregard at Hilton Head, South Carolina. It also helped take Fernandina, Florida on 4 March 1862
On 22 March 1862, a boat crew from the ship was attacked while reconnoitering Mosquito Inlet. In the ensuing engagement, Acting Lt. Budd and four others were killed.
Then the Penguin was sent to the West Gulf Blockading Squadron where it patrolled the Texas coast. On 8 July 1864, it assisted in the destruction of the blockade-runner Matagordo near Galveston. Then on 21 January 1865, it forced the blockade-runner Granite City ashore at Velasco, Texas.
After the war it returned to the east coast and was decommissioned at Boston 24 August 1865 and sold to Fogg and Co. 8 September.