After nearly two decades in reserve, Gregory was recalled to active duty and converted to a high-speed transport. Recommissioned with the new hull number APD 3 in November 1940, she conducted amphibious warfare training in the Atlantic and Caribbean into early 1942, then was transferred to the Pacific. She took part in exercises in Hawaiian waters and off the west coast until mid-1942.
Gregory next was ordered to the South Pacific, where the Allies' first major offensive against the Japanese was being prepared. On 7 August 1942, she landed Marines during the invasion of Guadalcanal and Tulagi, in the southern Solomon Islands. For the next month, she provided transport and other support services in the area.
On the night of 4–5 September 1942, while patrolling off Guadalcanal's Lunga Point in company with Little, APD 4, she encountered a greatly superior force of Japanese destroyers Yudachi, Hatsuyuki, and Murakumo. In a brief, intense and very-one sided battle, Gregory was riddled with enemy gunfire and soon sank. Her commanding officer, LCdr. Harry. F. Bauer, was lost in the action.
Gregory earned two stars on her Asiatic-Pacific campaign ribbon.
Sources: Clark, Curt, The Famed Green Dragons; Naval History & Heritage Command including Dictionary of American Naval Fighting Ships.