The Battle of Stony Lake was the third engagement in four days, the culmination of Sibley's 1863 punitive campaign against the Santee, Yankton, Yanktonai, and Teton Sioux in Dakota Territory. The campaign followed the Dakota War of 1862 in Minnesota, and Sibley intended to push the Sioux so far west they could no longer threaten settlements in Minnesota and eastern Dakota Territory. On July 24, he had fought the Sioux at Big Mound. Two days later, another clash at Dead Buffalo Lake. After each battle, the Sioux warriors fell back westward, covering the flight of their women and children toward the Missouri River crossing. Sibley's plan was simple: drive them into a trap between his own forces and those of General Alfred Sully, who was ascending the Missouri by steamboat with 1,200 soldiers. If the timing held, the Sioux would be caught between two armies.

The Sioux attack at Stony Lake was bold in conception. Warriors appeared on the surrounding hills, forming a semicircle with an arc of five or six miles around Sibley's column. Sibley estimated their numbers at 2,200 to 2,500; the Sioux later said 1,600 warriors had been present. But the element of surprise was lost. Warned by his scouts, Sibley closed up his stretched-out column, deployed skirmishers, and positioned his artillery. Colonel James H. Baker's 10th Minnesota Regiment advanced in Sibley's van, firing volleys supported by two mountain howitzers. The 6th and 7th Minnesota Regiments deployed to protect the flanks of the wagon train. Infantry charges dislodged the Sioux from several hilltop positions. Most of the warriors carried bows, arrows, and muskets, weapons ineffective beyond a hundred yards against trained infantry with artillery support. The battle ended as the Sioux faded away into the prairie. Sibley reported no casualties. Three Sioux warriors were seen knocked from their horses by an artillery round.

After the Sioux departed, Sibley marched his men eighteen unmolested miles and camped on Apple Creek, about ten miles southeast of present-day Bismarck. He expected to find General Sully waiting with reinforcements and supplies. There was no sign of him. The next morning, Sibley sent howitzers and his mounted Rangers forward twelve miles to prevent the Sioux from crossing the Missouri River, but he was too late. Most had crossed the day before, abandoning belongings in their haste. Warriors still on the eastern bank swam across under artillery fire, then continued shooting at Sibley's men from the far shore. Two soldiers, separated from the main column, were killed. For three nights, Sioux fighters burned the prairie, fired into the army's tents, and stampeded livestock. With Sully, supplies, and reinforcements nowhere to be found, Sibley abandoned the operation on July 31 and turned his worn-down column back toward Minnesota.

Sibley declared the expedition a success. He had pushed the Sioux westward across the Missouri, far from the settlements he was charged with protecting. He claimed 150 Indians killed and wounded across the three battles, against just six of his own men killed. The Santee chief Standing Buffalo offered a starkly different accounting: only thirteen Indians had been killed. The discrepancy is impossible to resolve, as the number of warriors actually engaged in each battle remains uncertain. What is certain is that the fighting did not end with Sibley's departure. Three days after he left the Missouri's banks, the Sioux attacked a river raft and killed twenty-two civilians. Sixteen more settlers were killed by Sioux raiding parties later that year in Minnesota. And Sully, who had been too late to coordinate with Sibley, eventually found his own battle that summer at Whitestone Hill, one of the bloodiest encounters of the entire Plains Indian Wars.