William was Aide-de-Camp to General Washington (1776), a member of his staff during the War of the Revolution, with the rank of Lieutenant-Colonel, serving as Paymaster General of the Continental Army (1776). Details of his service are found in Spark's Biographies, Vol No. VII. Major and Aide-de-Camp to General Lee, July 16, 1775. He was appointed by the Continental Congress as US Consul-General to France (1780). He sailed on December 20, 1780 from Chester, PA on the ship "Shillala". A letter written was mailed by him at a stop in Wilmington, Delaware. He was never heard from again, the ship was lost at sea. William’s appointment made by congress on Nov 4, 1780 and his loss in the service of the State Department is commemorated by a bronze plaque in the entrance to the new State Department Building in Washington, as being the first American to give his life for his country in foreign service.

A Boston merchant, who sometimes sailed as supercargo on voyages to the West Indies or to the southern colonies, came of age during the struggle between the American colonies and England. Young Palfrey was as ardently anti-British as anyone in Boston; his business connections with John Hancock doubtless helped arouse his enthusiasm for the American cause. When the colonials formed the Sons of Liberty, Palfrey took the job of secretary. One of his tasks was to write letters of encouragement to John Wilkes in England, while that erratic champion of American liberty was confined in King's Bench Prison. During the Revolutionary War Palfrey attained the rank of colonel. He was on General Washington's staff, and his chief later named him paymaster general of the Continental Army. No military smugness marred the colonel's character, recalled Harrison Gray Otis: " He wore a blue uniform, was called Col. Palfrey, and walked - not strutted-...his image is before me as that of a gentleman of the old school-polite, manly & elegant." Joseph Nourse added: " The public records are evident of the regularity of Col. W. Palfrey's Accounts." Palfrey became consul general to France in 1780, but he never reached Europe; his Bordeaux-bound ship the "Shillala" went down at sea without a trace.