It's a bit of a controversy. McCarthy's version of his military service changed over the years. Though he was exempt from the draft, he volunteered to join the Marines on July 29, 1942. He entered as a 2nd Lieutenant (although he later claimed to have entered as a "buck private"), and was trained as an intelligence officer.

In 1943, he was assigned to a Marine Bombing Squadron (VMSB-235). Early in his commission, he suffered an injury during a "shellback initiation", which he would later claim to be a combat wound. McCarthy's primary job with the squadron involved briefing and debriefing pilots, as well as examining photographs for intelligence purposes and preparing intelligence reports. He also flew some missions as a gunner/observer, though the number of missions he completed is disputed.

In 1944, he claimed to have flown 14 missions as a tailgunner with the marines. McCarthy was awarded the Distinguished Flying Cross in 1952 after he claimed to have flown 32 combat missions on his application for the medal in 1951. During World War II, the medal was typically given to pilots after the completion of 25 combat missions, or for extreme valor as decided by their superiors.

In 1952, a reporter by the name of Robert Fleming looked in to McCarthy's record and found that he had actually flown only 11 or 12 missions, and that McCarthy had apparently been excluded from the most dangerous missions flown by the company. This appears to indicate that McCarthy was awarded his medal under false pretenses. However, the marine corps did not rescind McCarthy's award.

In order to bolster his war record, McCarthy also brought up a letter, signed by his commanding officer Major Glenn Todd and Admiral Chester Nimitz, commending him for his service during the war. However, Major Todd did not recall writing the letter, and some have speculated that McCarthy wrote the letter himself as part of his duties as an intelligence officer.