After the Marathas were routed during the Third Battle of Panipat in the year 1761, Nizam Ali and his army of 60,000 immediately advanced and repulsed them as far as Puna and forced them to sue for lasting peace.

Nizam Ali then seized the Bidar Fort and later arrested Salabat Jung, this action of Nizam Ali Khan was ratified by the Mughal Emperor Shah Alam II, who issued a Firman terminating Salabat Jung (supported by the French East India Company), from his position as the Subedar of Deccan and appointing Nizam Ali Khan Asaf Jah II as his successor.

[citation needed] In 1795, he was defeated by Madhavrao II's Marathas at the Battle of Kharda and was forced to cede Daulatabad, Aurangabad and Sholapur and pay an indemnity of Rs.

[5] The following year, he realized that the fall of Tipu Sultan was imminent and thus, he entered into a Subsidiary alliance with the British East India Company.

[citation needed] Asaf Jah II died at Chowmahalla Palace, Hyderabad at the age of 69 on 6 August 1803.