During this period, Babayan "became not only the military leader but the most powerful man in Karabakh overall, controlling its government and economy" until his arrest and imprisonment in 2000 on charges of attempting to assassinate Arkadi Ghukasyan, President of the Nagorno-Karabakh Republic.

[2] According to Thomas de Waal, Babayan made his living as a garage mechanic and car-washer and also worked at a café before the First Nagorno-Karabakh War.

Babayan coordinated Armenian operations in Karabakh, participated in the planning of the capture of Shusha and was the commander of the Lachin front.

[6] After Nagorno-Karabakh's president Robert Kocharyan left his position to become prime minister of Armenia, Babayan became even more influential in Karabakh's civilian politics.

At a joint session of the security councils of Armenia and the Nagorno-Karabakh Republic in January 1998, at the urging of Vazgen Sargsyan, Robert Kocharyan, and Serzh Sargsyan, Babayan spoke strongly against President of Armenia Levon Ter-Petrosyan's plan to accept the OSCE Minsk Group's proposals to return some of the territory captured from Azerbaijan during the war and deploy international peacekeepers there; Ter-Petrosyan was forced to resign a month later.

[6] Robert Kocharyan was unable to deal with the Babayan issue directly due to the political chaos in Armenia following the Armenian parliament shooting in October 1999, leaving it to the government of Nagorno-Karabakh under president Arkadi Ghukasyan and the new Karabakh Army leadership.

On 22 March 2000, Babayan was arrested on charges of launching an assassination attempt on Arkadi Ghukasyan, which left the president seriously wounded but alive.

[7] The trial began on 18 September 2000 and ended on 26 February 2001, when Babayan was sentenced to 14 years of prison, stripped of several decorations and ranks, and disenfranchised.

[8] Babayan returned to Armenia in May 2016 after a de facto exile in Moscow, shortly after major clashes on the Nagorno-Karabakh line of contact.

In March 2017, Babayan was arrested by the Armenian National Security Service on charges of smuggling surface-to-air missiles and counterfeit Euros.

[11] During the 2020 Nagorno-Karabakh war, Babayan was involved in the mobilization of Karabakh Armenian reservists and participated in the planning of a number of operations with Artsakh Defense Army commander Jalal Harutyunyan.

[16] Babayan ran in the Armenian parliamentary election in June 2021 as the prime ministerial candidate for the Liberal Party, which he founded in March 2021.