After taking Tianjin on 23 August 1860, the imperial emissary and word arrived that the British had kidnapped the prefect of Tianjin. Sir Harry Parkes was arrested in retaliation on 18 September. Also captured were a number of British and French officers, Sikh soldiers, and a journalist from The Times. Sir Harry Parkes and the others were imprisoned, tortured, and interrogated.

The prisoners had been tortured by having their limbs bound with rope until their flesh was lacerated and became infected with maggots, and by having dung and dirt forced into their throats. Several were executed by beheading, their corpses fed to animals. Captured coolies who had worked for the allies were buried up to their necks and left to dogs.

After the release of Sir Harry Parkes and the surviving prisoners on 8 October, the extent of their mistreatment became apparent. The destruction of the Forbidden City was discussed, as proposed by Lord Elgin, to discourage the Qing Empire from using kidnapping as a bargaining tool, and to exact revenge on the mistreatment of their prisoners. However, an attack on Beijing was ruled out, as this had already been presented as threat for other terms. Elgin decided on burning the Summer Palace. In a letter, he explained that the burning of the palace was the punishment "which would fall, not on the people, who may be comparatively innocent, but exclusively on the Emperor, whose direct personal responsibility for the crime committed is established"

The Anglo-French forces clashed with Sengge Rinchen's Mongol cavalry on 18 September at the Battle of Zhangjiawan before proceeding toward the outskirts of Beijing for a decisive Battle in Tongzhou. The battle took place in the vicinity of the Palikao Bridge and is known by the name of the Battle of Palikao. The Qing troops found themselves trapped by the canal and unable to retreat, and the Chinese suffered massive losses. On 21 September, at Baliqiao (Eight Mile Bridge), Sengge Rinchen's 10,000 troops, including the elite Mongol cavalry, were annihilated after doomed frontal charges against concentrated firepower of the Anglo-French forces. The French army arrived at the Summer Palace outside Beijing on 6 October, followed by the British a day later.

With the Qing army devastated, the Xianfeng Emperor fled the capital and left behind his brother, Prince Gong, to take charge of peace negotiations that centred on the prisoners. The British demanded all prisoners be released, but China couldn't accept these terms. This provoked Britain, and they ordered an attack on Beijing. Xianfeng first fled to the Chengde Summer Palace and then to Rehe Province.

The attack on the city walls started on October 11th. The Anglo-French army was ready to enter the city and fight, but at 11:30 on the same evening, the gates opened, and the city surrendered. Anglo-French troops began looting the Summer Palace (Yiheyuan) and Old Summer Palace (Yuanmingyuan) immediately (as they were full of valuable artwork). Britain considered destroying the entirety of the Forbidden City but satisfied themselves with burning only the Summer Palaces. All the British prisoners were released, but some of them were completely unrecognizable due to the inflicted torture. The bodies of the prisoners who did not survive were also retrieved.

Two weeks later, Nikolay Ignatiev forced the Qing government to sign a "Supplementary Treaty of Peking", which ceded the Maritime Provinces east of the Ussuri River (forming part of Outer Manchuria) to the Russians, who went on to found the port of Vladivostok between 1860 and 1861. The Anglo-French victory was heralded in the British press as a triumph for British Prime Minister Lord Palmerston, which made his popularity rise to new heights. British merchants were delighted at the prospects of the expansion of trade in the Far East. Other foreign powers were pleased with the outcome too, since they hoped to take advantage of the opening-up of China.

The British, French and the Russians were all granted a permanent diplomatic presence in Beijing (something the Qing Empire resisted to the very end as it suggested equality between China and the European powers). The Chinese had to pay 8 million taels to Britain and France. Kowloon was ceded to the British owned Hong Kong. The opium trade was legalized and Christians were granted full civil rights, including the right to own property, and the right to evangelize.

The defeat of the Qing army by a relatively small Anglo-French military force (outnumbered at least 10 to 1 by the Qing army) coupled with the flight (and subsequent death) of the Xianfeng Emperor, and the burning of the Summer Palace, was a shocking blow to the once powerful Qing Empire. "Beyond a doubt, by 1860 the ancient civilization that was China had been thoroughly defeated and humiliated by the West". After the war, a major modernization movement, known as the Self-Strengthening Policy, began in China, and several institutional reforms were initiated.