After brief fighting in the city, Basayev and his men took over a local hospital complex where they gathered over 2,000 mostly civilian hostages, demanding a ceasefire in Chechnya and the resumption of Russian negotiations with Chechen leadership.

Over the next several hours, as Russian reinforcements arrived, the Chechens retreated to the residential district and regrouped in the city's main hospital, taking hostages on their way.

During the clashes and on the way to the hospital, the attackers killed as many as 41 people,[1] including police officers, soldiers, personnel from Budyonnovsk air base, and civilians.

At the hospital complex, which they quickly fortified and rigged with explosives, Basayev's 119-strong[2] and well armed group held more than 2,000 people (some estimates are as high as 5,000[2]) hostage, most of them civilians, including 150 children and a number of women with newborn infants.

[5] The New York Times quoted the hospital's chief doctor that "several of the Chechens had just grabbed five hostages at random and shot them to show the world they were serious in their demands that Russian troops leave their land.

[1][8] Basayev himself explained the choice of the pilots as a result of his personal "special relationship" with them,[9] referring to the death of his wife, child, and sister in an airstrike two week earlier, which he had sworn to avenge.

[6] Later, however, Russian authorities relented and allowed a group of journalists to enter the hospital for a press conference, at which Basayev repeated his demands publicly.

The task was given to a grouping of MVD and FSB special forces, including the elite units Alfa and Vympel, supported by armored vehicles and armed helicopters.

Yeltsin's human rights advisor Sergey Kovalyov described the scene: "In half an hour the hospital was burning, and it was not until the next morning that we found out what happened there as a result of this shooting.

[1] On 18 June, direct negotiations between Shamil Basayev and Russian prime minister Viktor Chernomyrdin led to a compromise, which ultimately became a turning point for the First Chechen War.

In a televised conversation with Basayev, Chernomyrdin agreed to halt military actions in Chechnya and begin top-level talks with separatist leaders.

When asked about the crisis by a journalist, Yeltsin denounced the rebels as ″horrible bandits with black bands on their foreheads″ (″Это оголтелые бандиты, понимаешь, с чёрными повязками″).

Basayev's group, along with a group of over 100 volunteer hostages (16 journalists, nine State Duma deputies including Kovalev, Oleg Orlov, Mikhail Molostvov, Aleksandr Osovtsov, Valeriy Borshchev, Yuliy Rybakov and Viktor Borodin,[9] and numerous other government officials, medical workers, and previously released hostages) boarded six buses and traveled to Chechnya through North Ossetia and Dagestan.

The volunteer hostages were then released, while Basayev, accompanied by some of the journalists, went on to the southern Chechen village of Dargo, Vedensky District, where he was welcomed as a hero.

After peace talks broke down and hostilities resumed, Russian forces never truly regained a position of strength, and the war concluded in August 1996 with a Chechen military victory.