Brigadier General Henry Hopkins Sibley had dreams that stretched from Texas to the Pacific. His plan was elegant on paper: gather an army in El Paso, march north through Confederate Arizona, defeat Union forces in New Mexico, capture Santa Fe, and then continue westward to claim California for the Confederacy. On January 3, 1862, Sibley left El Paso with 2,510 mounted Texans, three regiments and a partial fourth, heading toward Fort Craig 140 miles north. There, Colonel Edward Canby waited with 3,800 men, mostly infantry, of whom only 1,200 were seasoned soldiers. The rest included 2,000 New Mexican volunteers, 100 Colorado volunteers, and 500 militia. Among those volunteers, Kit Carson commanded the First Regiment of New Mexico Infantry.

Sibley arrived within fifteen miles of Fort Craig on February 13 and spent three days in a standoff, hoping to lure Canby into the open. Canby, distrusting his volunteer troops, refused. Down to a few days' rations, the Confederates could not wait indefinitely. On February 18, Sibley ordered his army to cross the Rio Grande and move up the eastern bank to Valverde Ford, six miles north of the fort, hoping to cut Union communications with Santa Fe. By February 20, the Confederates occupied hills opposite Fort Craig, but Canby had anticipated the move. Colonel Thomas Green's attempt to place artillery overlooking the river failed, forcing the Texans to make a dry camp, no fresh water, on a cold desert night. The mules exploding at midnight added insult to thirst.

Fighting erupted on February 21 when Confederate scouts under Major Charles Pyron found Union forces already blocking the Valverde ford. Both sides reinforced throughout the morning. By early afternoon, the remainder of the Confederate force arrived, desperately needing water and denied access to the river. Sibley, who had remained with the wagons and reportedly spent the day drunk and ill in an ambulance, relinquished command to Colonel Green. Around 2:00 pm, Green authorized something unprecedented: a lancer company charged what they believed was an inexperienced New Mexico unit on the Union right. The lancers instead met the Pike's Peakers, a Colorado company, who defeated the charge without breaking formation. Twenty lancers fell dead or wounded, nearly every horse killed or disabled. The survivors rearmed with pistols and shotguns and kept fighting. It was the first and last mounted lancer charge of the American Civil War.

By 4:00 pm, the Union appeared to hold the advantage. Canby decided against a frontal assault and instead moved to attack the Confederate left, repositioning troops including Carson's regiment, which crossed the river to join the line. This weakened his center and left. Green seized the moment, ordering an assault that the Confederates, crazed by thirst, executed with desperate fury. The Rio Grande lay just beyond Union lines, and reaching it meant survival. When some Union soldiers ran low on ammunition, they threw stones at the advancing Texans. It was not enough. The Confederate charge captured McRae's battery, six artillery pieces, and broke the Union line. Captain Alexander McRae died defending his guns. Canby requested a truce to remove the dead and wounded, then retreated to Fort Craig, leaving the road to Santa Fe open.

The Confederates won the battlefield but paid heavily: 36 killed, 150 wounded, one missing of 2,590 engaged. Canby reported 68 killed, 160 wounded, and 36 missing, plus roughly 200 deserters, a 16 percent casualty rate. Sibley judged Fort Craig too strong to assault and abandoned it, ceding the battlefield back to Union control while continuing toward Albuquerque and Santa Fe. Horse and mule losses forced him to dismount the 4th Texas as infantry. Neither general earned praise. Sibley spent the battle intoxicated in an ambulance; Canby weakened his line through poor repositioning and then blamed the New Mexican volunteers, mostly Hispanic, for the defeat. Kit Carson's regiment had actually performed well but was ordered to retreat while still advancing. The battle marked Canby's lowest point and Sibley's highest. Their careers would diverge sharply afterward, moving in opposite directions as sharply as the two armies separated along the Rio Grande.