Off the coast of Busan, the united Joseon fleet realized that the Japanese navy had readied their ships for battle and the Japanese army had stationed themselves around the shoreline. The united Joseon fleet assembled in the Jangsajin, or "Long Snake" formation, with many ships advancing in a line, and attacked straight into the Japanese fleet. Overwhelmed by the Joseon fleet, the Japanese navy abandoned their ships and fled to the coast where their army was stationed. The Japanese army and navy joined their forces and attacked the Joseon fleet from the nearby hills in desperation. The Joseon fleet shot arrows from their ships to defend and restrict their attacks, and in the meantime concentrated their cannon fire on destroying Japanese vessels.The Korean ships fired on the Japanese fleet and burned them using fire arrows while the Japanese fired on them from above in their forts. Even with cannons captured at Busan, the Japanese did little damage to the Korean warships. By the time the day had ended, 128 Japanese ships had been destroyed. Yi Sunsin gave orders to withdraw, ending the battle.

Yi Sun Shin originally intended to destroy all the remaining Japanese ships, however, he realized that doing so would effectively trap the Japanese soldiers on the Korean Peninsula, where they would travel inland and slaughter the natives. Therefore, Yi left a small number of Japanese ships unharmed and withdrew his navy to resupply. And just as Yi suspected, under the cover of darkness, the remaining Japanese soldiers boarded their remaining ships and retreated.

After this battle, the Japanese forces lost the control of the sea. The devastating blow dealt to the Japanese fleet isolated their armies in Korea and cut them off from their home bases. Since the Japanese forces realized the importance of the defensive lines of Busan Bay to secure the supply line, they tried to bring the west area of Busan under their control, when the Joseon navy came.