This was the first major battle of the Second Sino-Japanese War. At first, Chiang's forces conducted an air war with Japan over the city. However, Japan's Mitsubishi A5M aircraft were far more superior than China's Curtiss F11C biplanes and shot them out of the sky. It eventually turned into a ground war in the city. The Chinese ground forces of 70,000 far outnumbered the Japanese troops of 6,300 marines, so their prospects for victory looked good. Shortly afterward, Japan sent in as many as 100,000 of their Imperial forces. As a result, the Chinese army was forced to retreat, leaving Shanghai in the hands of the Japanese.

The battle lasted from August 13, 1937, to November 26, 1937, and was one of the largest and bloodiest battles of the entire war, later described as "Stalingrad on the Yangtze", and is often regarded as the battle where World War II started. After over three months of extensive fighting on land, in the air and at sea, the battle concluded with a victory for Japan.

Chinese forces were equipped primarily with small-calibre weapons against much greater Japanese air, naval, and armour power. In the end, Shanghai fell, and China lost a significant portion of its best troops, while failing to elicit any international intervention. The resistance of Chinese forces and length of the battle at over 3 months shocked the Japanese, who had been indoctrinated with notions of cultural and martial superiority, and largely demoralized the Imperial Japanese Army who believed they could take Shanghai within days and China within months.

The battle can be divided into three stages, and eventually involved nearly one million troops. The first stage lasted from August 13 to August 22, 1937, during which the NRA attempted to eradicate Japanese troop presence in downtown Shanghai. The second stage lasted from August 23 to October 26, 1937, during which the Japanese launched amphibious landings on the Jiangsu coast and the two armies fought a Stalingrad-type house-to-house battle, with the Japanese attempting to gain control of the city and the surrounding regions. The last stage, ranging from October 27 to the end of November 1937, involved the retreat of the Chinese army in the face of Japanese flanking manoeuvres, and the ensuing combat on the road to China's capital, Nanjing.