By the early 1720s, Dost Mohammad Khan had transferred himself from a mercenary to the ruler of a small state.
After the death of the Mughal emperor Aurangzeb, the Malwa territory was claimed by the Marathas and some kings of Rajputana, in addition to the Mughals.
All these powers made such claims mainly through proxies (such as the local chieftains), although they did engage in occasional punitive raids when the local chiefs refused to pay the tribute demanded by them.
Dost Mohammad Khan acknowledged Mughal authority by sending expensive gifts (such as an elephant) and flattering letters to the Mughal Emperor, who was controlled by the Sayyid Brothers.
Emperor Farrukhsiyar conferred on him the title Nawab Diler Jung, probably on the recommendation of the Sayyid Brothers.
Dost also prevented the Maratha invasions by regularly paying them chauth (tribute).

In 1719, the Sayyid Brothers murdered Emperor Farrukhsiyar, who had been plotting against them.
Subsequently, they placed Rafi Ul-Darjat and Rafi ud-Daulah as the emperors, both of whom died of sickness in 1719.
Muhammad Shah then ascended the Mughal throne with the help of the Sayyid Brothers, who acted as his regents till 1722.
The hostility between Sayyid Brothers and the rival nobleman Nizam-ul-Mulk had been growing in the recent years.
Dost Mohammad Khan was well-aware of the power of Nizam-ul-Mulk, who was the Subahdar (Governor) of Malwa; he had seen his strong force passing through Bhopal on its way to the Deccan in the south.
However, he allied himself with the Mughal Court controlled by the Sayyid Brothers, with whom he had developed a close friendship.

In 1720, the Sayyid Brothers dispatched a Mughal force led by Dilawar Ali Khan against Nizam in Malwa.
When Dost Mohammad Khan was asked to support this force, he sent a contingent commanded by his brother Mir Ahmad Khan to fight on the Mughal side.
The Mughal force ambushed the Nizam at Burhanpur near Khandwa on 19 June 1720, but was decisively defeated by the Nizam, who was supported by the Marathas.
Dilawar Khan, Mir Ahmad and other generals sent by the Sayyid Brothers were killed in the battle, and Dost Mohammad Khan's forces retreated to Malwa, pursued and plundered by the Nizam's Maratha auxiliaries.
Thus, Dost earned the wrath of both the Nizam and the Maratha Peshwa for opposing them.

Subsequently, Nizam-ul-Mulk helped the emperor Muhammad Shah in getting the Sayyid Brothers killed.
After having established control over the Deccan, he decided to get even with Dost Mohammad Khan for supporting the Sayyid Brothers.
On 23 March 1723, he despatched a force to Bhopal, where Khan put up some fight from his fort.
After a brief siege, Khan agreed to a truce the next day.
He arranged an expensive welcome banquet for the Nizam, presented him with an elephant and stationed his forces on a hillock renamed to Nizam tekri (Nizam's hillock) in the Nizam's honor.
He agreed to cede part of his territory, including the Islamnagar fort.
He also paid a tribute of ten lakh (one million) rupees with a promise to pay a second installment later.
He was also forced to send his 14-year-old son and heir Yar Mohammad Khan to Nizam's capital Hyderabad, as a hostage.

The Nizam assumed control over Bhopal, and appointed Dost Mohammad Khan as a kiledar (fort commander).
In return for a fort, the payment of Rs.
50,000 and the pledge of 2000 troops, the Nizam granted a sanad (decree) to Khan recognizing the latter's right to collect the revenues from the territory.
By the early 1720s, Dost Mohammad Khan had transferred himself from a mercenary to the ruler of a small state. After the death of the Mughal emperor Aurangzeb, the Malwa territory was claimed by the Marathas and some kings of Rajputana, in addition to the Mughals. All these powers made such claims mainly through proxies (such as the local chieftains), although they did engage in occasional punitive raids when the local chiefs refused to pay the tribute demanded by them. Dost Mohammad Khan acknowledged Mughal authority by sending expensive gifts (such as an elephant) and flattering letters to the Mughal Emperor, who was controlled by the Sayyid Brothers. Emperor Farrukhsiyar conferred on him the title Nawab Diler Jung, probably on the recommendation of the Sayyid Brothers. Dost also prevented the Maratha invasions by regularly paying them chauth (tribute).
In 1719, the Sayyid Brothers murdered Emperor Farrukhsiyar, who had been plotting against them. Subsequently, they placed Rafi Ul-Darjat and Rafi ud-Daulah as the emperors, both of whom died of sickness in 1719. Muhammad Shah then ascended the Mughal throne with the help of the Sayyid Brothers, who acted as his regents till 1722. The hostility between Sayyid Brothers and the rival nobleman Nizam-ul-Mulk had been growing in the recent years. Dost Mohammad Khan was well-aware of the power of Nizam-ul-Mulk, who was the Subahdar (Governor) of Malwa; he had seen his strong force passing through Bhopal on its way to the Deccan in the south. However, he allied himself with the Mughal Court controlled by the Sayyid Brothers, with whom he had developed a close friendship.
In 1720, the Sayyid Brothers dispatched a Mughal force led by Dilawar Ali Khan against Nizam in Malwa. When Dost Mohammad Khan was asked to support this force, he sent a contingent commanded by his brother Mir Ahmad Khan to fight on the Mughal side. The Mughal force ambushed the Nizam at Burhanpur near Khandwa on 19 June 1720, but was decisively defeated by the Nizam, who was supported by the Marathas. Dilawar Khan, Mir Ahmad and other generals sent by the Sayyid Brothers were killed in the battle, and Dost Mohammad Khan's forces retreated to Malwa, pursued and plundered by the Nizam's Maratha auxiliaries. Thus, Dost earned the wrath of both the Nizam and the Maratha Peshwa for opposing them.
Subsequently, Nizam-ul-Mulk helped the emperor Muhammad Shah in getting the Sayyid Brothers killed. After having established control over the Deccan, he decided to get even with Dost Mohammad Khan for supporting the Sayyid Brothers. On 23 March 1723, he despatched a force to Bhopal, where Khan put up some fight from his fort. After a brief siege, Khan agreed to a truce the next day. He arranged an expensive welcome banquet for the Nizam, presented him with an elephant and stationed his forces on a hillock renamed to Nizam tekri (Nizam's hillock) in the Nizam's honor. He agreed to cede part of his territory, including the Islamnagar fort. He also paid a tribute of ten lakh (one million) rupees with a promise to pay a second installment later. He was also forced to send his 14-year-old son and heir Yar Mohammad Khan to Nizam's capital Hyderabad, as a hostage.
The Nizam assumed control over Bhopal, and appointed Dost Mohammad Khan as a kiledar (fort commander). In return for a fort, the payment of Rs. 50,000 and the pledge of 2000 troops, the Nizam granted a sanad (decree) to Khan recognizing the latter's right to collect the revenues from the territory.
Dost Mohammad of Bhopal