When Union General John C. Fremont issued an emancipation proclamation purporting to free the slaves in Missouri, Thompson declared a counter-proclamation and his force of 3,000 soldiers began raiding Union positions near the border in October. On October 15, 1861, Thompson led a cavalry attack on the Iron Mountain Railroad bridge over the Big River near Blackwell in Jefferson County. After successfully burning the bridge, Thompson retreated to join his infantry in Fredericktown. Soon afterwards, he was defeated at the Battle of Fredericktown and withdrew, leaving southeastern Missouri in Union control.
After briefly commanding rams in the Confederate riverine fleet in 1862, Thompson was reassigned to the Trans-Mississippi region. There, he engaged in a number of battles before returning to Arkansas in 1863 to accompany Gen. John S. Marmaduke on his raid into Missouri. Thompson was captured in August in Arkansas, and spent time in St. Louis' Gratiot Street prison, as well as at the Fort Delaware and Johnson's Island prisoner-of-war camps, ("Poor old Jeff, how my heart went out to him; he a prisoner and his devoted wife in a madhouse". Source: My Life and My Lectures by Major Lamar Fontaine, a prisoner with M. Jeff Thompson in Fort Delaware, p. 238) Eventually he was exchanged in 1864 for a Union general. Later that year, Thompson participated in Major General Sterling Price's Missouri expedition, taking command of "Jo" Shelby's famed "Iron Brigade" when Shelby became division commander. He served competently in this role. In March 1865, Thompson was appointed commander of the Northern Sub-District of Arkansas. He surrendered his troops on May 11, 1865, in Jacksonport, Arkansas.
Although Thompson frequently petitioned for the Confederate rank of brigadier general it was never granted. His brigadier rank came from his Missouri State Guard service.
A ship in the Confederate Navy, the CSS General M. Jeff Thompson, was named in Thompson's honor. The side-wheel river steamer was converted at New Orleans to a "cottonclad" ram in early 1862. It was commissioned in April and sent up the Mississippi River to join the River Defense Fleet in Tennessee waters, seeing its first action in the Battle of Plum Point Bend. After being set afire by gunfire from Union warships in the Battle of Memphis on June 6, 1862, the ship ran aground and soon blew up.
After the war, Thompson moved to New Orleans, where he returned to civil engineering. He designed a program for improving the Louisiana swamps, a job that eventually destroyed his health. He returned to St. Joseph, Missouri in 1876 where he succumbed to tuberculosis. He is buried in Mount Mora Cemetery in St. Joseph, Missouri.