Kalabakan in 1963 was a rural settlement built on timber and plantation agriculture, situated 50 kilometres northwest of Tawau and only 19 kilometres from the Indonesian border. The village had grown since the 1930s around rubber, cocoa, tea, oil palm, and hemp operations, with the largest employer being North Borneo Timbers, a subsidiary of the Bombay Burmah Trading Corporation. The Kalabakan River served as the primary transport route, carrying logs downstream to processing facilities. When Malaysia was formed on 16 September 1963, incorporating the former British colony of North Borneo, Indonesia's President Sukarno launched what became known as the Confrontation, a campaign of military pressure aimed at destabilizing the new federation. Kalabakan, remote and close to the border, became a target.

Between early and mid-December 1963, approximately 160 Indonesian personnel, including marines from the Korps Komando Operasi and communist guerrilla fighters, infiltrated Sabah through Serudong Laut village and Silimpopon before reaching Kalabakan. Malaysian-Commonwealth strategists had assumed the dense swamp and jungle surrounding the village made overland approach impractical. They were wrong. The raiders divided into assault groups with specific objectives: one to hit the police outpost from the north, another to attack the military outpost from the rear by ascending the hill behind it, and a third to operate within the village itself. The broader plan was ambitious. After taking Kalabakan, the force intended to link up with a second detachment near Tawau and seize the entire east coast, advancing through Lahad Datu to Sandakan.

The assault began on the evening of 29 December. The military outpost, a fortified wooden building on a hill originally owned by North Borneo Timbers, had its defenses oriented toward the river, where commanders expected any attack would come. The Indonesians attacked from the rear. Second Lieutenant Raja Shaharudin Raja Rome, commanding 38 personnel at the base, heard gunshots targeting other areas before his position came under intense fire. The camp's own lights illuminated the defenders while the attackers remained invisible in the darkness. The attack on the police outpost came ten minutes late, a communication breakdown that gave defenders there time to organize. The police station, built in the 1930s with barbed-wire perimeters, held against the assault. The military outpost, lacking such basic defenses, did not fare as well. Sporadic fire continued until 0300 hours as the Indonesians withdrew.

By 0330 hours, reinforcements arrived from a nearby outpost under Second Lieutenant Wan Nordin Wan Mohammad. At dawn, soldiers, police, and the Vigilante Corps secured the area, finding one Indonesian body near the police station. A Royal Air Force Whirlwind helicopter evacuated the wounded. British Gurkhas arrived on 3 January to lead search-and-destroy operations. Captain Zainol and Private Ismail were posthumously promoted to Major and Lance Corporal for advancing toward danger. By 10 February 1964, of the 160 infiltrators, 29 had been killed, 33 captured, and 22 surrendered. The raid exposed critical vulnerabilities: outposts designed on World War I principles, with trenches and sandbags but no barbed wire on vulnerable flanks. Intelligence about an earlier Indonesian raid on Serudong Laut never reached Kalabakan in time. The Confrontation would continue until 1966, but Kalabakan changed how Malaysia defended its Borneo frontier.