Cole's Cavalry had committed an insult that Mosby could not let stand. On January 1, eighty of Major Henry Cole's Maryland troopers had ridden deep into the country around Upperville and Rectortown - the heart of what the locals called Mosby's Confederacy - looking for partisan Rangers to capture. With Mosby himself on a scout near Fairfax, Captain William Smith, called Billy by the men, scraped together 32 Rangers and rode to meet them. The two forces collided near Middleburg. When Captain Hunter's horse went down beneath him, the Federal line broke. Smith's 32 men killed, wounded, or captured 57 Maryland troopers and rode off with sixty of their horses. It was a humiliation for Cole. It was also, for Mosby, intolerable that Federals had ridden so brazenly into his territory at all. Within the week, Benjamin Franklin Stringfellow, a scout temporarily attached to Mosby's command from J.E.B. Stuart's staff, located Cole's main camp on the heights overlooking Harpers Ferry. Mosby decided to repay the insult.

On January 9, a hundred Rangers gathered at Upperville and rode north through deep snow toward Hillsboro. They reached Woodgrove around eight in the evening and stopped at the home of Ranger Henry Heaton long enough to rest the horses and warm the men. Just north of Hillsboro they met Stringfellow's scouting party, who reported exactly where Cole's camp stood and how its pickets were posted. The Hillsboro-Harpers Ferry Road was guarded. So the column turned east, climbed the wooded western slope of Short Hill Mountain, and followed it north until they struck the Potomac. They turned west along the riverbank. By the time they reached the base of Loudoun Heights itself, the grade was too steep for mounted men. They dismounted and led the horses up. Two hundred yards from the Union camp, Mosby stopped them. He sent Stringfellow's detachment around to the rear of the camp to seize Cole's headquarters. He took the rest of the column up the hillside until they were directly west of the sleeping soldiers. Then he waited for the signal.

What happened next was a textbook lesson in why night attacks usually fail. Gunfire crackled from the direction of Stringfellow's position. A group of horsemen appeared, riding toward Mosby from the camp. In the darkness Mosby took them for Federal cavalry that had discovered Stringfellow and was coming to drive his own party off. He ordered a charge. His Rangers crashed down upon the riders - who turned out to be Stringfellow's own squadron, riding to coordinate the attack. For several minutes the two parties fought each other in the dark, and several Rangers fell to bullets from their own friends. Of the four men killed in the battle, three were believed to be victims of friendly fire. By the time Mosby's men sorted out what was happening, Cole's troopers were awake. Captain George W.F. Vernon of Company A, half-dressed in the cold, had already formed a dismounted skirmish line. In the dark the Federals had one decisive advantage: the only men on horseback were the Rangers. Vernon's first volley dropped several Confederates silhouetted against the snow.

The fight lasted forty-five minutes. When Mosby heard the sound of Federal infantry marching up from Harpers Ferry, he ordered a general withdrawal. The Rangers carried away six prisoners - pickets taken from a post on the Hillsboro road at Piney Run - and nearly sixty horses. They left their dead and seriously wounded behind, including Billy Smith and First Lieutenant Thomas Turner. A few miles down the road Mosby halted, sent two men back under a flag of truce, and offered to exchange the prisoners for his wounded. Major Cole refused. The Rangers rode back into Mosby's Confederacy with 14 of their men dead, mortally wounded, wounded, or captured - among the wounded was William Mosby, John's own brother. Cole's Maryland Cavalry had suffered six dead, fourteen wounded, and six taken prisoner. For their performance Cole was promoted to colonel and Vernon to lieutenant colonel. It was the first time any Federal command had bested Mosby's Rangers in a fight Mosby himself had started. There would be others, but this one - in the snow, in the dark, at three in the morning on a mountain above the Potomac - was the first.