Attempting to tie down the Union forces in the Valley, under the overall command of Maj. Gen. Nathaniel P. Banks, Jackson received incorrect intelligence that a small detachment under Col. Nathan Kimball was vulnerable, but it was in fact a full infantry division more than twice the size of Jackson's force. His initial cavalry attack was forced back and he immediately reinforced it with a small infantry brigade. With his other two brigades, Jackson sought to envelop the Union right by way of Sandy Ridge. But Col. Erastus B. Tyler's brigade countered this movement, and, when Kimball's brigade moved to his assistance, the Confederates were driven from the field. There was no effective Union pursuit.

Although the battle was a Confederate tactical defeat, it represented a strategic victory for the South by preventing the Union from transferring forces from the Shenandoah Valley to reinforce the Peninsula Campaign against the Confederate capital, Richmond. Following the earlier Battle of Hoke's Run, the First Battle of Kernstown may be considered the second among Jackson's rare defeats.