The war was instigated in part by the machinations of Asaf Jah II, the Nizam of Hyderabad, who sought to divert the company's resources from attempts to gain control over the Northern Circars.

By the Third Carnatic War (1757–1763), the British had gained somewhat solid footholds at Bombay, Madras, and Calcutta, and had also marginalised (although not eliminated) the influence of other colonial powers.

[6] Lord Robert Clive next applied to Mughal Emperor Shah Alam II, who in August 1765 issued a decree granting the company rights to that territory.

When the British began occupying the Northern Circars in March 1766, the Nizam objected, issuing threatening letters to company authorities in Madras.

Hyder was annoyed that the British had established a fortified outpost at Vellore, and that the company had several times rebuffed his offers of alliance.

An offer he made in late 1766 was rejected because the local company council viewed it as incompatible with the treaty signed with the Nizam.

In exchange for payments of 30 lakhs rupees the Marathas agreed to withdraw north of the Krishna River; by March, when the Nizam began his invasion, they had already withdrawn.

According to Mysore historian Mark Wilks, this action by the Marathas was a somewhat typical move to acquire wealth that might otherwise be claimed by other belligerents.

This diplomatic maneuvering resulted in an attack against a company outpost at Changama by the combined Mysore and Hyderabad army under Hyder's command.

Hyder moved on to capture Kaveripattinam after two days of siege, while Colonel Smith, who commanded at Changama, eventually retreated to Tiruvannamalai for supplies and reinforcements.

[17] With the onset of the monsoon season, Haider opted to continue campaigning rather than adopting the usual practice of suspending operations because of the difficult conditions the weather created for armies.

[20] He retreated northward, covering the movements of the Nizam's forces, but was disheartened when an entire corps of European cavalry deserted to the British.

[26] They also convinced the Marathas to enter the conflict, and a large force of theirs, under the command of Morari Rao, joined with Colonel Smith at Ooscota in early August 1768.

[29] Hyder was then foiled in an attempt to prevent the arrival of a second British column at the allied camp; the strength of these combined forces convinced him to retreat from Bangalore toward Gurramkonda, where he was reinforced by his brother in law.

[30] He also attempted diplomatic measures to prevent a siege of Bangalore, offering to pay ten lakhs rupees and grant other land concessions in exchange for peace.

[30] On 3 October, Hyder, while moving his army from Guuramkonda back toward Bangalore, surprised a small garrison of Muhammed Ali Khan Wallajah's men at a rock fort called Mulabagilu, near Hosakote.

[33] The severity of the conflict convinced Colonel Smith that he would be unable to effectively besiege Bangalore without first inflicting a major defeat on Hyder in open battle.

In November 1768 he split his army into two, and crossed the ghats into the Carnatic, regaining control of many minor posts held by the British.

En route to Erode Hyder overwhelmed one contingent of British, who were sent as prisoners to Seringapatam when it was established that one of its officers was fighting in violation of a parole agreement.