With future Vice President Aaron Burr in his charge, Putnam was fooled in October 1777 by a feint executed by British troops under the command of General Sir Henry Clinton, making way for Clinton's capture of Fort Montgomery and Fort Clinton. As was standard procedure, Putnam was relieved of command and brought before a court of inquiry for these losses. It was ascertained that the events in question were the result of a lack of men, not of the fault of any commander, and he was exonerated of any wrongdoing.

Washington had also lost some of his faith in Putnam, due to an incident in which Putnam delayed in forwarding troops to Washington when first ordered to do so. In 1779, he was put in command of the right wing of the army, which included the Virginia, Maryland, and Pennsylvania divisions.

During the winter of 1778–1779, Putnam and his troops were encamped at the site now preserved as the Putnam Memorial State Park in Redding, Connecticut. On February 26, 1779, Putnam escaped from the British, riding down a steep slope in Greenwich, Connecticut, for which he became famous.