Louisville was built at St. Louis, Missouri, by James B. Eads in 1861, under contract with the War Department for the price of $89,000. Designed by U.S. Navy "Constructor" (Naval Engineer) Samuel M. Pook, she was accepted 15 January 1862; and commissioned 16 January 1862, Commander Benjamin M. Dove, USN, in command. Despite being designed by naval personnel, budgetary concerns led the War Department to fund construction of Louisville with Army funds. As such, she was turned over to Army command upon completion and joined the Army's Mississippi River Squadron. Eventually the entire western river flotilla would be transferred to Navy command.
Louisville assisted the Army in the capture of Fort Donelson on the Cumberland River 14 to 16 February 1862. From 1 to 5 March, she aided in the occupation of Columbus, Kentucky, the "Gibraltar of the West." Departing Cairo, Illinois, 14 March, she served in the capture of Island No. 10 and New Madrid, Missouri, through 7 April, and helped to prevent southern ships from ascending the river.
In May, Louisville was ordered to Fort Pillow and participated in the Battle of Memphis 6 June. Commanded by Rear Admiral Charles Henry Davis, her squadron captured and sank the Confederate Mississippi flotilla. On 15 June, she attacked the upper batteries at Vicksburg, before shifting efforts to the White River, departing Helena, Arkansas, 5 August. Escorting Benton and General Bragg (gunboat) to the mouth of the river, she met little resistance. In late September 1862 she was transferred to the Navy and assigned a new commanding officer, Lieutenant Commander Richard W. Mead.
After escorting transport Meteor, disembarking troops at Bledsoe's and Hamblen's landings 21 October, Louisville returned to Helena to join the gunboat fleet, Mississippi Squadron. She joined Baron DeKalb, Cincinnati, Lexington, Signal, New Era, Romeo, Rattler, and Glide later in the month on an expedition up the White River in support of Major General William T. Sherman's army. Louisville captured the steamer Evansville near Island No. 36 on 1 November.
Now under the command of Lieutenant Elias K. Owen, Louisville aided in the capture of Fort Hindman, Arkansas Post, 4 to 11 January 1863, and formed part of the expedition through Steele's Bayou, 14 to 28 January. She was ordered to the Yazoo River the 31st and moved to stop Confederates felling trees across the bayou on 21 March. She then turned her attention to the batteries on the river, running past those at Vicksburg on 16 April, and engaging the lower ones on the 29th. She joined Pittsburgh, Mound City and Carondolet on that date, silencing the guns of the fort on Grand Gulf and helping to establish the siege which forced Vicksburg's surrender 4 July 1863.