After studying the military tactics of the Frenchman Joseph-Francois Dupleix, Hyder induced his older brother, a brigade commander in the Mysore army, to obtain military equipment from the Bombay government and to enroll 30 European sailors as gunners. Thus was formed the first Indian-controlled corps of sepoys armed with firelocks and bayonets and backed by artillery served by Europeans. Hyder received an independent command in Mysore in 1749. Eventually, he displaced Nanjaraj, the prime minister, made the raja a prisoner in his own palace, and around 1761 made himself ruler of Mysore. He then conquered Bednore (now Haidarnagar), Kanara, and the petty poligars (feudal chiefs) of southern India.

In 1766 the Marathas, the Nizam 'Ali Khan of Hyderabad, and the British entered a triple alliance against Hyder, but he soon bought off the Marathas, captured Mangalore, and defeated the Bombay army of the British. In April 1769 he secured from the British a promise of aid in an attack, but when the Marathas invaded his territories in 1771, the British did not send assistance. Long offended by this failure, he in 1779 increased his army with French and European soldiers of fortune and joined in a confederacy with the Nizam and the Marathas against the British, who had further provoked him by capturing the French settlement of Mahe, which was within Hyder's territories. In 1780 he warred on the Karnatic, a region of southern India, destroyed a British detachment of 2,800 men, and seized Arcot. The British then succeeded in detaching the Nizam and the Marathas from Hyder and defeated him three times successively in 1781 at the battles of Porto Novo, Pollilur, and Sholinghur; Hyder lost more than 10,000 men at Porto Novo.

In early 1782 an army under Hyder's son Tippu, aided by 400 Frenchmen, defeated 100 British and 1,800 sepoys at the Coleroon River. That April, 1,200 French troops landed at Porto Novo and seized Cuddalore, while the British tried to drive Hyder and Tippu from the fort of Arni, their chief arsenal in the plains. On the arrival of George Macartney (later 1st Earl Macartney) as governor of Madras, the British fleet captured Nagappattinam and convinced Hyder that he could not stop the British. In his dying words, Hyder implored Tippu to make peace with the British.