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The Third Battle of Panipat took place on 14 January 1761, at Panipat, about 60 miles (97 km) north of Delhi between a northern expeditionary force of the Maratha Empire and the forces of the King of Afghanistan, Ahmad Shah Abdali, supported by two Indian Muslim allies—the Rohilla Afghans of the Doab, and Shuja-ud-Daula, the Nawab of Awadh. Militarily, the battle pitted the French origin artillery and cavalry of the Marathas against the heavy cavalry and mounted artillery (zamburak and jizail) of the Afghans and Rohillas led by Ahmad Shah Abdali and Najib-ud-Daulah, both ethnic Afghans (the former is also known as Ahmad Shah Abdali). The battle is considered one of the largest and most eventful fought in the 18th century, and has perhaps the largest number of fatalities in a single day reported in a classic formation battle between two armies.
The decline of the Mughal Empire following the 27-year Mughal-Maratha war (1680–1707) had led to rapid territorial gains for the Maratha Empire. Under Peshwa Baji Rao, Gujarat, Malwa and Rajputana came under Maratha control. Finally, in 1737, Baji Rao defeated the Mughals on the outskirts of Delhi, and brought much of the former Mughal territories south of Delhi under Maratha control. Baji Rao's son, Balaji Baji Rao (popularly known as Nana Saheb), further increased the territory under Maratha control by invading Punjab in 1758. This brought the Marathas into direct confrontation with the Durrani empire of Ahmad Shah Abdali. In 1759 he raised an army from the Pashtun tribes and Baloch tribes and made several gains against the smaller Maratha garrisons in Punjab. He then joined with his Indian allies—the Rohilla Afghans of the Gangetic Doab—forming a broad coalition against the Marathas. 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, a number of whom were pilgrims desirous of making pilgrimages to Hindu holy sites in northern India. The Marathas started their northward journey from Patdur on the 14 March 1760. Both sides tried to get the Nawab of Awadh, Shuja-ud-Daulah, into their camp. By late July, Shuja-ud-Daulah made the decision to join the Afghan-Rohilla coalition, preferring to join what was perceived as the 'army of Islam'. This was strategically a major loss for the Marathas, since Shuja provided much needed finances for the long Afghan stay in North India. It is doubtful whether the Afghan-Rohilla coalition would have the means to continue their conflict with the Marathas without Shuja's support.
The slow-moving Maratha camp finally reached Delhi on 1 August 1760, and took the city the next day. There followed a series of skirmishes along the banks of the river Yamuna, and a battle at Kunjpura, which the Marathas won against an Afghan garrison of about 15,000 (at this time, Abdali and the other Afghan forces were on the eastern side of the Yamuna river). However, Abdali daringly crossed the river Yamuna on the 25 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. During the siege both sides tried to cut off the other's supplies. At this the Afghans were considerably more effective, so that by the end of November 1760 they had cut off almost all food supplies into the besieged Maratha camp (which had about 250,000 to 300,000, most of whom were non-combatants). According to all the chronicles of the time, food in the Maratha camp ran out by late December or early January and cattle died by the thousands. Reports of soldiers dying of starvation began to be heard in early January. On 13 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 specific site of the battle itself is disputed by historians, but most consider it to have occurred somewhere near modern-day Kaalaa Aamb and Sanauli Road. The battle lasted for several days and involved over 125,000 troops. Protracted skirmishes occurred, with losses and gains on both sides. The forces led by Sadashiv Rao Bhau came out victorious after destroying several Afghan flanks. The extent of the losses on both sides is heavily disputed by historians, but it is believed that between 60,000–70,000 were killed in fighting, while the numbers of injured and prisoners taken vary considerably. According to the single best eye-witness chronicle- the bakhar by Shuja-ud-Daulah's Diwan Kashi Raj, about 40,000 Afghan prisoners were slaughtered in cold blood the day after the battle. Grant Duff includes an interview of a survivor of these massacres in his History of the Marathas and generally corroborates this number. Shejwalkar, whose monograph Panipat 1761 is often regarded as the single best secondary source on the battle, says that "not less than 100,000 Afghans (soldiers and non-combatants) perished during and after the battle."
The result of the battle was the halting of further Afghan advances in India, and a destabilization of their territories, for roughly 10 years. This period of 10 years is marked by the rule of Peshwa Madhavrao, The success of this campaign can be seen as the last saga of the long story of Panipat.