Waddell was born in Pittsboro, North Carolina. He joined the United States Navy as a Midshipman in September 1841. His nearly two decades in the U.S. Navy included early service in USS Pennsylvania, Mexican-American War operations off Veracruz aboard USS Somers, a tour off South America in USS Germantown, an assignment as a United States Naval Academy instructor, eastern Pacific duty in USS Saginaw and a cruise with the East Indies Squadron with USS John Adams. Lieutenant Waddell resigned his commission while returning home in the latter ship late in 1861 at the outbreak of the American Civil War and was dismissed from the U.S. Navy in January 1862.
In March 1862, Waddell was appointed a Lieutenant in the Confederate States Navy. Sent to New Orleans, he was assigned to the incomplete ironclad CSS Mississippi until her destruction in late April. The next month, while serving as an artillery officer ashore, he participated in the battle between Confederate shore batteries and Federal ironclads at Drewry's Bluff, Virginia. He had more shore battery service at Charleston, South Carolina during the rest of 1862 and into 1863. Sent abroad in March 1863, First Lieutenant Waddell was stationed in England awaiting the availability of a seagoing position.
That opportunity finally arrived in October 1864 at sea in the central Atlantic, where he converted the English steamer Sea King to the Confederate cruiser CSS Shenandoah. As her commanding officer, Commander Waddell made a long and productive cruise through the south Atlantic, across the Indian Ocean and into the north Pacific. In the Arctic waters there, he devastated the United States flagged whaling fleet during June 1865. However, by then the Civil War had been effectively over for more than two months and, when he received confirmation of this fact in early August, Waddell disarmed his ship and took her back to England.
Waddell did not return to the United States until 1875, when he became captain of the commercial steamer City of San Francisco. He later was in charge of the State of Maryland's oyster regulation force. James Iredell Waddell died at Annapolis, Maryland, on March 15, 1886.