Shortly after moving to Dayton, Ohio to practice law, Vallandigham entered politics. He was elected as a Democrat to the Ohio legislature in 1845 and 1846, and also served as editor of a weekly newspaper, the Dayton Empire, from 1847 until 1849. He ran for Congress in 1856, and was narrowly defeated. He appealed to the House of Representatives, which seated him, by a party vote, on the next to last day of the term. He was elected by small margins in 1858 and in 1860, when he reluctantly supported Stephen A. Douglas. Once the Civil War began, however, the majority anti-secession population of the Dayton area turned him out, and Vallandigham lost his bid for a third term in 1862 by a relatively large vote; but this result may not be strictly comparable, owing to redistricting.

Vallandigham was a very strong supporter of states' rights and although personally opposed to slavery, believed that the federal government had no power to regulate the institution. He further believed that the Confederacy had a right to secede and could not constitutionally be conquered militarily. He supported the compromise Crittenden Resolutions and proposed (February 20, 1861) a division of the Senate and of the electoral college into four sections, each with a veto. He strongly opposed every military bill, leading his opponents to allege that he wanted the Confederacy to win the war. He was the acknowledged leader of the Copperheads and in May 1862 coined their slogan, "To maintain the Constitution as it is, and to restore the Union as it was."

After General Ambrose E. Burnside had issued General Order Number 38, warning that the "habit of declaring sympathies for the enemy" would not be tolerated in the Military District of Ohio, Vallandigham gave a major speech (May 1, 1863) charging the war was being fought not to save the Union but to free blacks and enslave whites. To those who supported the war he declared, Defeat, debt, taxation sepulchres - these are your trophies. He denounced "King Lincoln," calling for Abraham Lincoln's removal from the presidency. On May 5 he was arrested as a violator of General Order No. 38. Vallandigham's enraged supporters burned the offices of the Dayton Journal, the Republican rival to the Empire.

Vallandigham was tried by a military court 6-7 May, denied a writ of "habeas corpus", convicted by a military tribunal of "uttering disloyal sentiments" and attempting to hinder the prosecution of the war, and sentenced to 2 years' confinement in a military prison. A Federal circuit judge upheld Vallandigham's arrest and military trial as a valid exercise of the President's war powers. In February 1864 the Supreme Court decided that it had no power to issue a writ of habeas corpus to a military commission (Ex parte Vallandigham, 1 Wallace, 243). However, President Lincoln, who considered Vallandigham a "wily agitator" and was wary of making him a martyr to the Copperhead cause, ordered him sent through the lines to the Confederacy, and he was taken under guard to Tennessee.

Vallandigham traveled by blockade runner to Bermuda and then to Canada, where he declared himself a candidate for Governor of Ohio, subsequently winning the Democratic nomination in absentia. (Outraged at his treatment by Lincoln, by a vote of 411 -11 Ohio Democrats nominated Vallandigham for governor at their June 11th convention.) He ran his campaign from a hotel in Windsor, Ontario, where he received a steady stream of visitors and supporters. He asked in one speech, Shall there be free speech, a free press, peaceable assemblages of the people, and a free ballot any longer in Ohio? His platform included withdrawing Ohio (and any other Northern state that would agree) from the Union if Lincoln refused to reconcile with the Confederacy. Vallandigham lost the 1863 Ohio gubernatorial election in a landslide to pro-Union War Democrat John Brough, but his activism had left Dayton bitterly divided between pro- and anti-slavery factions and left in its wake an atmosphere of racial tension. He appeared publicly in Ohio and openly attended the 1864 Democratic National Convention in Chicago. He wrote the "peace plank" of the platform declaring the war a failure and demanding an immediate end of hostilities. He was unable to block the nomination of General George B. McClellan who stated his support for the war. Although Vallandigham and most Copperheads supported McClellan, the contradiction weakened their campaign.

Vallandigham returned to Ohio after the war, ran unsuccessfully for Senate and the House on an anti-Reconstruction platform, and resumed his law practice. By 1871 he won the Ohio Democrats over to a "new departure" policy that essentially would forget the Civil War and start fresh. He died in Lebanon, Ohio, after accidentally shooting himself with a pistol. At the time, Vallandigham was representing the defendant in a murder case. He was attempting to prove the victim had in fact committed suicide, and was demonstrating the possibility with a gun he believed to be unloaded. His last words expressed his faith in "that good old Presbyterian doctrine of predestination." He is buried in Woodland Cemetery, Dayton, Ohio.

Vallandigham's assertion that 'he did not want to belong to the United States' prompted Edward Everett Hale to write The Man Without a Country. This short story , which appeared in the Atlantic in December 1863, was widely republished, and did much to stimulate patriotism.

John A. McMahon, Vallandingham's nephew, was also a U.S. Representative from Ohio.