Stephen III had taken the Moldavian throne in 1457 and spent the next decade consolidating power and reclaiming territory. In 1465, he seized Chilia, a fortress and harbor on the Black Sea coast that had been held jointly by Hungarian and Wallachian forces. The capture gave Moldavia direct access to maritime trade, but it infuriated Corvinus. The following year, Stephen regained Khotyn from Poland through diplomacy, further demonstrating his ability to play the region's major powers against each other. When Transylvanian locals launched an uprising in 1467, Corvinus discovered that Stephen had been supporting the rioters, likely to hunt down a rival claimant named Aron who had taken refuge in Hungarian territory. The Polish chronicler Jan Dlugosz recorded that a certain Berendeja then approached Corvinus, promising to deliver Moldavia as a vassal state if the king would install him as prince. Corvinus had his pretext.

The Hungarian army crossed into Moldavia in November 1467, advancing with a force that included 500 cannons, a formidable artillery train by any medieval standard. Stephen, commanding fewer troops, did not meet the invasion head-on. Instead, the Moldavians evacuated civilian populations from the border region and blockaded roads with felled trees, slowing the Hungarian advance and stretching supply lines. By mid-December, Corvinus had reached the town of Baia, where he settled his forces. On December 15, as dusk fell, Stephen launched his attack. Small detachments crept into the town and set it ablaze from three directions simultaneously. As flames consumed the wooden structures, confusion spread through the Hungarian camp. In the chaos of smoke and firelight, Stephen ordered his men to dismount and fight on foot, pressing through the burning streets in a battle that raged from evening until dawn.

As the night battle turned against the Hungarians, the fighting reached the royal guard itself, two hundred heavily armed knights protecting Corvinus and the Hungarian aristocracy. In the melee, Corvinus was wounded, struck by projectiles that left him unable to ride. According to multiple chronicles, the king had to be carried from the battlefield on a stretcher to prevent his capture. A Romanian assisted his escape from the Moldavian lines, a man whom Stephen later tracked down and had executed for the betrayal. The Hungarians retreated, leaving behind their encampment. Stephen's forces captured Hungarian battle standards along with, as Dlugosz recorded, a huge booty of tents, wagons, and guns. Stephen sent the captured standards to King Casimir IV of Poland as proof of his victory, a diplomatic gesture that underscored Moldavia's alignment with Poland against Hungarian ambitions.

The aftermath of Baia reshaped the political landscape of the region. In 1468, Stephen campaigned into Transylvania, found the rival claimant Aron, and had him executed, removing the threat that had partly triggered the conflict. Stephen and Corvinus eventually negotiated a peace treaty in which Stephen formally accepted Corvinus as his nominal overlord, a face-saving concession that cost Moldavia nothing in practical terms. The relationship between the two leaders evolved from enmity into something approaching alliance. When the Ottoman Empire launched a massive invasion of Moldavia in 1475, Corvinus sent 6,800 soldiers to reinforce Stephen's army, contributing to the decisive Moldavian victory at the Battle of Vaslui. The night battle at Baia had proven that Moldavia could not be taken by force. What followed was a pragmatic partnership between two rulers who had learned the cost of fighting each other when larger threats loomed to the southeast.