One major exception was that of the wealthiest and most powerful principality, Hyderabad, where the Nizam, Mir Osman Ali Khan, Asaf Jah VII, a Muslim ruler who presided over a largely Hindu population, chose independence and hoped to maintain this with an irregular army.

[8]: 224 In November 1947, Hyderabad signed a standstill agreement with the Dominion of India, continuing all previous arrangements except for the stationing of Indian troops in the state.

[9][10] Nizam's power had weakened because of the Telangana Rebellion and the rise of a radical paramilitary group known as the Razakars whom he could not put down.

On 7 September, Jawaharlal Nehru gave ultimatum to Nizam, demanding ban on the Razakars and return of Indian troops to Secunderabad.

[19] The Sunderlal Committee, appointed by Indian prime minister Jawaharlal Nehru, concluded that between 30,000 and 40,000 people had died in total in the state, in a report which was not released until 2013.

[21] Following the Nizam's forces surrender on September 17, 1948, a military government headed by Major General J. N. Chaudhuri who led Operation Polo was established.

A firman was issued by the Nizam on November 24, 1949 wherein he accepted henceforth the Indian Constitution to be applicable to the State of Hyderabad.

Hyderabad city remained as the joint capital of both Andhra Pradesh and Telangana for 10 years till 1st June 2024.