Beginning in the 1480s, Ava faced constant internal rebellions and external attacks from the Shan States, and began to disintegrate. In 1510, Taungoo, located in the remote southeastern corner of the Ava kingdom, also declared independence.^[39] When the Confederation of Shan States conquered Ava in 1527, many refugees fled southeast to Taungoo, a landlocked petty kingdom in peace, and one surrounded by larger hostile kingdoms.

Taungoo, led by its ambitious king Tabinshwehti and his deputy general Bayinnaung, would go on to reunify the petty kingdoms that had existed since the fall of the Pagan Empire, and found the largest empire in the history of Southeast Asia. First, the upstart kingdom defeated a more powerful Hanthawaddy in the Taungoo–Hanthawaddy War (1534–41). Tabinshwehti moved the capital to newly captured Bago in 1539. Taungoo had expanded its authority up to Pagan by 1544 but failed to conquer Arakan in 1545–47 and Siam in 1547–49. Tabinshwehti's successor Bayinnaung continued the policy of expansion, conquering Ava in 1555, Nearer/Cis-Salween Shan States (1557), Lan Na (1558), Manipur (1560), Farther/Trans-Salween Shan states (1562–63), the Siam (1564, 1569), and Lan Xang (1565–74), and bringing much of western and central mainland Southeast Asia under his rule.

Bayinnaung put in place a lasting administrative system that reduced the power of hereditary Shan chiefs, and brought Shan customs in line with low-land norms.^[40] But he could not replicate an effective administrative system everywhere in his far flung empire. His empire was a loose collection of former sovereign kingdoms, whose kings were loyal to him, not the kingdom of Taungoo. The over-extended empire, held together by patron-client relationships, declined soon after his death in 1581. Siam broke away in 1584 and went to war with Burma until 1605. By 1597, the kingdom had lost all its possessions, including Taungoo, the ancestral home of the dynasty. In 1599, the Arakanese forces aided by Portuguese mercenaries, and in alliance with the rebellious Taungoo forces, sacked Pegu. The country fell into chaos, with each region claiming a king. Portuguese mercenary Filipe de Brito e Nicote promptly rebelled against his Arakanese masters, and established Goa-backed Portuguese rule at Thanlyin in 1603.

Despite being a tumultuous time for Myanmar, the Taungoo expansions increased the international reach of the nation. Newly rich merchants from Myanmar traded as far as the Rajahnate of Cebu in the Philippines where they sold Burmese Sugar (śarkarā) for Cebuano gold.^[41] Filipinos also had merchant communities in Myanmar, historian William Henry Scott, quoting the Portuguese manuscript Summa Orientalis, noted that Mottama in Burma (Myanmar) had a large presence of merchants from Mindanao, Philippines.^[42] The Lucoes, a rival to the other Filipino group, the Mindanaoans, who instead came from the island of Luzon, were also hired as mercenaries and soldiers for both Siam (Thailand) and Burma (Myanmar), in the Burmese-Siamese Wars, the same case as the Portuguese, who were also mercenaries for both sides.^[43]