While returning to Cyprus on 7 August on board the Athens-Nicosia airliner, Karayiannis saw shell bursts and smoke in the Kokkina area.
General Grivas informed Karayiannis that the Swedish battalion of the UN Forces in Cyprus had abandoned their positions on the hill known as Akoni in the Kokkina area on 6 August, that Cypriot National Guard units which took their place came under fire from units of the TMT stationed on the nearby hill known as Lourovouno, and that therefore Grivas had ordered an attack on Lourovouno for the morning of 7 August.
Karayiannis reports that he later found out that the attack on Lourovouno had been ordered without the Greek government having been informed, and that Grivas had misled Makarios and the Council of Ministers of the Republic of Cyprus into thinking he would obtain authorisation from Greece before acting.
He became even more incensed when he found out that the attack had been badly organised, so that it had only started at 3:30pm instead of the planned time in the morning, and therefore failed to achieve its objectives by nightfall.
Still without authorisation from Greece, but with the support of Makarios, Grivas escalated operations, with the objective of taking over the entire Kokkina enclave.
After 21:00 Grivas returned to his office at the Headquarters of the Cypriot National Guard and, in the presence of Georkadjis, Karayiannis and others, submitted his resignation, describing himself as a "renegade" for not obeying the orders of the Greek government.
At 10:00 on the morning of 9 August, the Turkish Air Force resumed its operations in the Kokkina area and extended them to civilian targets in the region.
Napalm attacks on the villages of Pyrgos, Pigenia, Pachyammos, Pomos and the town of Polis Chrysochous killed 53 and injured 125 civilians.
The Council of Ministers of the Republic of Cyprus, in an emergency session with Makarios presiding, decided to issue an ultimatum to the Turkish government warning that unless air attacks stopped, a general attack on Turkish Cypriot villages by the Cypriot National Guard would be ordered, and asked General Karayiannis to select two villages for destruction in case the ultimatum was not heeded.
Karayiannis, however, after his return to Greece and consultation with the Greek government, wrote Makarios another letter upholding his decision to resign.
In June 1965 Karayiannis began a series of articles on his time in Cyprus in the Greek newspaper National Herald, in which he related his account of the facts and accused Grivas of military incompetence, irrational behaviour and psychological weakness.