Although he ruled as an independent ruler - waging wars, concluding peace treaties, making appoints -Nizam-ul-Mulk Asaf Jah never openly declared himself to be independent from the Mughal rule probably so as to ensure peace and bring about reforms in the region. He was successful in these endeavors as he ousted the Marathas from the region, tried to rid the revenue system of its corruption and brought about more efficient administration. However, after his death, the British and French tried to interfere in the affairs of the state and hence, as quickly as the State was formed, so was its independence snatched away again!

The next ruler of Hyderabad - Nizam Ali - was an ally of Mysore during the First Anglo-Mysore war (1767 CE) in which the British faced defeat. However, due to pressure from the British, Nizam Ali signed the Treaty of Masulipatnam through which Hyderabad became a subsidiary of the British, with the presence of British Resident in the Nizam's court and a British subsidiary force stationed in the dominion of Hyderabad. Thus, Hyderabad was the first regional kingdom to become a Subsidiary of the British.