In 426 BC, three thousand hoplites from Ambracia invaded Amphilochian Argos in Acarnania and occupied the fort of Olpae, a position on the Ambracian Gulf. Ambracia was a Corinthian colony and a Spartan ally; taking Olpae was part of a plan to extend Peloponnesian influence over the northwest Greek coast, a region Athens had been working to bring under its control. The Acarnanians, whose territory was being invaded, sent for help — both to Demosthenes, the Athenian general, and to twenty Athenian ships operating nearby under the commanders Aristotle and Hierophon. Meanwhile, the Ambraciots made their own appeal for reinforcement. Eurylochus of Sparta marched his army through Acarnanian territory without being detected — a significant accomplishment that gave the Peloponnesian side a larger combined force. The two armies faced each other across a ravine, and both spent five days making preparations.

Demosthenes understood that his army was outnumbered. He responded by concealing four hundred Acarnanian hoplites in the terrain before the battle began, ready to emerge when the fighting was underway. When the lines engaged, Eurylochus moved his left wing outward to try to envelop Demosthenes's right — a maneuver that was working, threatening to surround the Athenian and Messenian troops, when the hidden Acarnanians broke cover and struck. The sudden attack from an unexpected direction caused panic through the Peloponnesian formation. Eurylochus was killed in the fighting. On the other side of the field, the Ambraciots had actually defeated the Acarnanian and Amphilochian left wing, driving it back toward Argos — but when those Ambraciot troops turned and found the rest of the army in chaos, they were themselves defeated on their return. The battle ended after dark, with Demosthenes's forces victorious. About three hundred of his men had died in the fighting.

Menedaius, the Spartan officer who took command after Eurylochus fell, came to Demosthenes the next day to arrange terms. Demosthenes agreed to let the Spartan and Peloponnesian commanders escape — but publicly, ostentatiously, while the Ambraciot rank and file were refused the same terms. This was deliberate. As Thucydides recorded, Demosthenes intended "to discredit the Lacedaemonians and Peloponnesians with the Hellenes in those parts, as traitors and self-seekers." Allowing Spartan officers to save themselves while abandoning their Ambraciot allies was the message. Some Ambraciots tried to slip away with the Peloponnesian column; the Acarnanians, who had agreed to let Menedaius go, chased the rest and killed around two hundred. The surviving Ambraciots and Peloponnesians found shelter with Salynthius, king of the Agraeans, in neighboring territory.

Before Demosthenes could consolidate his position, a second Ambraciot army was already marching toward Olpae from the city, unaware of what had happened. They camped at Idomene on the road to the fort. Demosthenes moved at night, sending an advance force to hold the higher ground, then following with his main army. In the darkness, he had his troops approach calling out the same watchword as the Ambraciot army — creating enough confusion that the sentries delayed raising an alarm. The surprise was nearly total. Most of the second army died at Idomene; those who survived fled into the hills or into the sea, where the twenty Athenian ships were waiting. By the time the two days of fighting were finished, Ambracia had lost around a thousand men in total. Thucydides would describe the losses as among the worst suffered by a single Greek city in the entire Peloponnesian War.

Demosthenes's allies refused to let him press further. The Acarnanians and Ambraciots — despite having been enemies days before — signed a hundred-year peace treaty. The Acarnanians' reasoning was straightforward: they did not want Athens to become the dominant power in the gulf any more than they had wanted Sparta. The treaty bought them security without trading one master for another. Demosthenes returned home with his ships and his victory, having reshaped the strategic situation in northwestern Greece without acquiring the territory that might have made Athens dangerous there. The fort of Olpae and the fields around it returned to the quiet they held before the armies arrived. What remained was the outcome: Ambracia shattered, Sparta embarrassed, and a hundred-year commitment to peace signed among people who had just been killing each other.