Arnold mingled with Loyalist sympathizers in Philadelphia and married into the Loyalist family of Peggy Shippen. She was a close friend of British Major John André and kept in contact with him when he became head of the British espionage system in New York. Many historians see her as having facilitated Arnold's plans to switch sides; he opened secret negotiations with André, and she relayed their messages to each other.

The British promised £20,000 for the capture of West Point, a major American stronghold. Washington greatly admired Arnold and gave him command of that fort in July 1780. His scheme was to surrender the fort to the British, but it was exposed in September 1780 when American militiamen captured André carrying papers which revealed the plot. Arnold escaped; André was hanged.

Arnold received a commission as a brigadier general in the British Army, an annual pension of £360, and a lump sum of over £6,000. He led British forces in the Raid on Richmondand nearby areas, and they burned much of New London, Connecticut to the ground and slaughtered surrendering forces after the Battle of Groton Heights—just a few miles downriver from the town where he had grown up. In the winter of 1782, he and Peggy moved to London, England.