Nationalist force at the northern front would take a defensive position, fighting a blocking action to prevent the enemy from escape.

After suffering several hundred fatalities and over eighteen hundred being captured alive by the enemy within a single day of fighting, Shanxi and Suiyuan warlords withdrew their troops back to the eastern bank of the Yellow River on August 21, 1935, and never attempt to engage the enemy again for the rest of the campaign, and the communists' eastern front was thus secured.

This newly formed 15th Legion of the Chinese Red Army was supported by the local communist guerrillas and militia that also totaled more than seven thousands, and both sides were ready for the next stage.

Realizing the enemy was getting larger and stronger, thus more difficult to eradicate, nationalist forces switched to an offensive mode.

The 107th Division of the 67th Army advanced to Luochuan County, while sending out one of the battalion of its 619th Regiment to guard Goat's Spring (Yangquan, 羊泉).

In the morning of October 1, 1935, the 110th Division of the nationalist 67th Army marched from Yan'an toward Ganquan, attempted to rescue the besieged town, exactly as the communists had predicted.

After five hours of fierce fighting, the trapped 110th Division of the nationalist 67th Army was annihilated, suffering over a thousand fatalities, with every officer of brigade level and above killed, including the divisional commander He Lizhong (何立中).

After suffering the huge defeat with nearly a division completely annihilated, the nationalists were forced to change their battle plan by adopting the once successfully blockade strategy used against the main communist base in Jiangxi, and nationalist forces in the north, east and west stopped their advance completely and dug in at the border of the communist base, while nationalist force in the south adopted a gradual push northward, in an attempt to tighten the stranglehold on the enemy by eventually squeezing the enemy into annihilation.

Witnessing the disastrous defeat of their comrades-in-arms, other nationalist warlords no longer wanted to continue the carry on the fight and exhausting their troops against the communist base.

They would rather preserve their troops to protect their own turfs instead of sacrificing them for Chiang, so one by one, they withdrew their forces back to their own territory and the 3rd encirclement campaign against Shaanxi–Gansu Soviet resulted in nationalist failure, and the communist base would survive and became the base from where the communists eventually succeeded in taking over entire China one and half a decade later.