A Hungarian army under the command of Ispán Denis stormed into Sirmium once more in spring 1166. The Hungarians routed a Byzantine army, and occupied the whole province with the exception of Zimony. Emperor Manuel sent three armies against Hungary. The first army, which was under the command of protostrator Alexios Axuch and Stephen III's brother, Béla, was stationed by the Danube to distract attention from the movements of the two other units, which plundered Transylvania under the command of Leon Batatzes and John Doukas. The Byzantine campaign caused great devastation in the eastern territories of the Kingdom of Hungary, forcing Stephen III to seek reconciliation.

Emperor Manuel dispatched an army to Sirmium and sent his fleet to Zimony after Easter 1167. The Hungarians assembled their troops, and recruited mercenaries, especially Germans, according to Choniates. However, the Byzantine army led by Andronikos Kontostephanos annihilated the Hungarians, who were under the command of Ispán Denis, in a decisive battle which was fought near Zimony on 8 July.

The Hungarians sued for peace on Byzantine terms and recognised the empire’s control over Bosnia, Dalmatia, Croatia south of the Krka River as well as the Fruška Gora. They also agreed to provide hostages for good behaviour; to pay Byzantium a tribute and supply troops when requested.