William had inherited the title of Earl of Northumbria in 1152 from his older brother, the future Malcolm IV of Scotland. He gave it up in 1157, under pressure from Henry II of England, and he spent the rest of his life trying to get the territory back. The opportunity came in 1173. Henry II's own sons revolted against him, in what became known as the Revolt of 1173 to 1174, and Henry was tied down on the continent. William saw the chance to recover the north. He invaded Northumbria, marched on Newcastle upon Tyne, found the partly built stone castle there too strong to take, attacked Prudhoe Castle further upriver, found it equally stubborn, and went home. In 1174 he came back with a much larger army, including a contingent of Flemish mercenaries, and tried again.

The second invasion went better, at least at first. William avoided Newcastle this time and went straight at Prudhoe, but its defenders had spent the past year strengthening the walls. After a three-day siege he abandoned it and moved north to invest Alnwick. Here he made the kind of decision medieval kings tended to regret. He divided his army into three columns rather than keeping it concentrated. One of those columns, under Duncan, Earl of Fife, ranged south-east to Warkworth and burned the church of St Lawrence, with refugees who had taken sanctuary inside it still trapped within the walls. The atrocity reads in the chronicles like the spasm of an army that had stopped listening to its commander. William himself remained near Alnwick with what amounted to a personal guard of about sixty fighting men. He had no idea anyone was coming.

On the night of 11 July, four hundred mounted knights left Newcastle and rode north toward Alnwick. Their commander was Ranulf de Glanvill, a Suffolk lord who would later serve Henry II as chief justiciar of England. The column contained seasoned knights, some of whom had fought Scots before. Heavy fog rolled in along the coast as they rode through the night. They lost their way. Dawn came up grey and the riders found themselves, almost by accident, near William's camp outside Alnwick. The alarm went up. William rushed from his tent and tried to mount and form a line with his sixty men. The English charged. The Scottish bodyguard met the charge head on. The fighting ended within minutes. William's horse was killed beneath him, he was thrown to the ground, and the knights pulled him up alive. The rest of his bodyguard either died fighting or surrendered.

William was taken first to Newcastle as a prisoner, then judged too important for any English castle and shipped across the Channel to Falaise in Normandy. While he sat in a Norman keep, Henry sent forces into Scotland and occupied its five strongest castles: Roxburgh, Berwick, Jedburgh, Edinburgh, and Stirling. To get out, William signed the Treaty of Falaise, swearing fealty to the English crown and agreeing to garrison the captured castles with English soldiers paid at Scottish expense. When he was finally released and travelled back through Newcastle, a local mob attacked him in the street, a reminder of the depth of feeling along this border. The treaty lasted fifteen years. Richard the Lionheart, needing money for his crusade to the Holy Land, eventually sold the castles back to William for ten thousand silver marks. It was the last serious Scottish attempt to recover Northumbria; sixty-three years later, the Treaty of York fixed the border roughly where it still runs.