In September 1990, a referendum was held in the Krajina asking local voters if they agreed with Serb "sovereignty and autonomy" in Croatia, which was passed by a majority of 99.7%.

Babić's administration in Knin then announced the creation of a Serb Autonomous Oblast, named SAO Krajina, on 21 December 1990, and on 1 April 1991 it declared that it would secede from Croatia to join Serbia.

In this capacity, he established an armed militia which set up road blocks in its territory, effectively severing the southern Croatian coastal region of Dalmatia from the rest of the country.

Clashes between Krajina Serbs and Croatian security forces broke out almost immediately after Croatia declared independence on June 25, leaving dozens dead.

Around August 1991, Babić became a party to what war crimes prosecutors would later describe as a "joint criminal enterprise" to permanently forcibly remove the non-Serb population of the territory under his control, with the ultimate goal of making the region part of a new Serb-dominated state.

A full-scale war was launched in which a large area of territory, amounting to a third of Croatia, was seized and the non-Serb population was either massacred or ethnically cleansed.

The international community attempted to resolve the conflict in November 1991 by proposing a peace plan put forward by the United Nations Special Envoy Cyrus Vance, under which the Krajina would be demilitarised and protected by a UN peacekeeping force while political talks on its future took place.

Babić strongly opposed this, instead renaming the SAO Republic of Serbian Krajina (RSK) on 19 December 1991 (which later absorbed the Serb-held areas of eastern Croatia in February 1992).

In early August 1995, the Croatian government launched Operation Storm to retake the entire area of the Krajina (with the exception of the strip in eastern Slavonia, which remained under Serb control until 1998).

His confession to the charge of persecution, a crime against humanity, marked a major victory for the ICTY prosecutors, as Babić was, prior to his death, the only participant in the Croatian war to admit guilt.

Fellow Serb leaders and commanders that Babić accused for war crimes in Croatia, during his trial in The Hague, involved Slobodan Milošević, Milan Martić, Jovica Stanišić, Franko Simatović, and Momčilo Krajišnik.

"[13] Serbian Radical Party leader and fellow inmate, Vojislav Šešelj, claimed to have contributed to Babić's suicide by "making his life miserable."