Alliance,D. Ireland, master, was boarded at Eastville, Va., on the night of 19 September 1863 by a party of 25 Confederate guerrillas under Acting Master J. Y. Beall, C.S. Navy. Loaded with valuable military stores and provisions, she was used to capture schooner J. J. Houseman on 21 September, as well as the schooners Samuel Pearsall and Alexandria on the 22d. The helms of the three prizes were lashed by the Confederate raiders who started them over the bar at Wachapreague Inlet, Va.
On 23 September 1863, Alliance was discovered in Old Haven Creek by the Union ships of the Potomac Flotilla. Taken under fire, she was run ashore where some 30 or more small boats became busily employed in removing her cargo. USS Freeborn fired three shells in an effort to scatter the boats but could not land an armed party to stop the proceedings because of a heavy sea. The Richmond Globe reported cargo valued at approximately $10,000 was saved by the small boats before Alliance was burned at Milford Haven in the Chesapeake Bay to prevent capture by Union forces.
Alliance was listed by the Commander of the Federal North Atlantic Blockade Squadron in January 1863 as being fitted out and purchased by the Confederate States to run the blockade at Wilmington. She was still on the wanted list of the Union Fleet in December of the same year, said to be very active on sea lanes running from Nassau and Bermuda to Wilmington and other Atlantic ports of the Confederacy. She was captured some time prior to 3 May 1864 when Acting Rear Adm. S. P. Lee was ordered by the Secretary of the Navy to send the prize steamer Alliance to Boston if not already sent out.