From the mid 11th century, the Kingdom of Hungary had been expanding its territory and influence southwards, with a view to annexing the regions of Dalmatia and Croatia. The Byzantines and Hungarians launched a number of invasions of each other's territory, and the Byzantines regularly aided pretenders to the Hungarian throne. Friction and outbreaks of open warfare between the Byzantines and Hungarians reached a peak in the 1150s and 1160s.

The Byzantine emperor Manuel I Komnenos attempted to achieve a diplomatic and dynastic settlement with the Kingdom of Hungary. In 1163, under the terms of an existing peace treaty, King Stephen III's younger brother Béla was sent to Constantinople to be raised under the personal tutelage of the emperor himself. As Manuel’s relative (Manuel's mother was a Hungarian princess) and the fiancé of his daughter, Béla became a Despotes (a title newly created for him) and in 1165 he was named as an heir to the throne, taking the name Alexios. But in 1167, King Stephen refused to give Manuel control of the former Byzantine territories allocated to Béla-Alexios as his appanage; this directly led to the war that ended with the Battle of Sirmium.

The Byzantines achieved a decisive victory, forcing the Hungarians to sue for peace on Byzantine terms. They also agreed to provide hostages for good behaviour; to pay Byzantium a tribute and supply troops when requested. The Battle of Sirmium completed Manuel's drive to secure his northern frontier.