Neither commander truly wanted this battle. The Spanish brigadier Mariano Osorio had concentrated some five thousand royalist troops inside fortified Talca and seemed content to stay behind its walls. Roughly seven kilometers away, the patriot United Army, about seven thousand strong under the Argentine general José de San Martín, held the Cancha Rayada plains. San Martín feared an attack on his flank and ordered his men to shift position. It was Colonel José Ordóñez, chafing inside Talca, who pressed Osorio to strike. Permission granted, Ordóñez devised exactly the maneuver San Martín dreaded most: slip around the city under cover of night and fall on the patriot vanguard before it could form.

Ordóñez's gamble worked. His attack landed on the battalion near O'Higgins's command, beside San Martín's own position, while the patriot ranks were still in motion. The vanguard scattered. O'Higgins, his horse killed and his arm bloodied, was suddenly exposed. San Martín made an uncharacteristic choice and held his ground rather than retreat, and more men fled under fire, abandoning their weapons and supplies in the dark. Only when the disorder became total did he order a withdrawal. The rear and reserves had at least repositioned, and they absorbed the blow, but they had no commander present. Colonel Juan Gregorio de Las Heras stepped into the gap, taking charge of the retreat and dragging back what artillery and arms he could.

Cancha Rayada was the only defeat the campaign suffered, and it was a brutal one. Around 150 patriot soldiers died and two hundred were taken prisoner; the entire Argentine artillery train was lost, along with horses, mules, and weapons from both the Chilean and Argentine divisions. Yet victory cost the royalists more. Of the roughly two thousand men who charged that night, two hundred were killed, three hundred captured, and some six hundred deserted afterward, more than half the assault force gone. These were real men on both sides, conscripts and volunteers, frightened in the dark, dying far from home over a continent's future they could not see whole.

By March 21, the battered patriot army, down to about three and a half thousand men, regrouped at San Fernando. News of the defeat raced ahead of the truth. Rumors that both O'Higgins and San Martín had been killed swept Santiago, and panicked families began an exodus toward Mendoza across the Andes. San Martín sent word that he was reassembling his troops with happy results, already counting four thousand men. He was right to hope. Just seventeen days after the catastrophe at Cancha Rayada, on April 5, 1818, the same army met Osorio on the fields of Maipú near Santiago and destroyed the royalist force in roughly six hours of fighting, securing Chilean independence.