Under Peshwa Baji Rao, Gujarat, Malwa and Mughal territories south of Delhi came under Maratha control. Baji Rao’s son, Balaji Baji Rao (popularly known as Nana Saheb) invaded Punjab. To counter Maratha advances, Durrani empire of Ahmad Shah Abdali joined with the Rohilla Afghans of the Gangetic Doab and Shuja-ud-Daulah, Nawab of Awadh. The Marathas, under the command of Sadashivrao Bhau, responded by gathering an army of between 45,000–60,000, which was accompanied by roughly 200,000 non-combatants and started their northward journey in March, 1760. The slow-moving Maratha camp reached Delhi in August, 1760, and took the city. However, Abdali daringly crossed the river Yamuna on the 25th of October at Baghpat, cutting off the Maratha camp from their base in Delhi. This eventually turned into a two-month-long siege led by Abdali against the Marathas in the town of Panipat. Food in the Maratha camp ran out by late December or early January and cattle died by the thousands. On the 13th of January the Maratha chiefs begged their commander, Sadashiv Rao Bhau, to be allowed to die in battle than perish by starvation. The next day the Marathas left their camp before dawn and marched south towards the Afghan camp in a desperate attempt to break the siege. The two armies came face-to-face around 8:00 a.m., and the battle raged until evening.
The battle involved over 125,000 troops. One of the bullets took the life of Vishwas Rao, the 17 year old son of the Peshwa. The commander Sadashiv Rao fought like a lion but ultimately cut down by Afghan sword. The forces led by Ahmad Shah Durrani came out victorious after destroying several Maratha flanks. Between 60,000–70,000 were killed in fighting, while the numbers of injured and prisoners taken vary considerably. The cryptic message sent to Peshwa Balaji Baji Rao states “Two pearls (Sadashiv Rao and Vishwas Rao) have been dissolved, twenty seven gold mohurs (Janokoji Rao and other commanders) have been lost, and of the silver and copper (soldiers and camp followers) the total cannot be cast up”. The result of the battle was the halting of further Maratha advances in the north, and a destabilization of their territories, for roughly 10 years until Peshwa Madhavrao revived Maratha domination.