The army of Austria, approximately 100,000 strong, was setting up camp around the town of Karánsebes (now Caransebeş, in modern Romania). The army's vanguard, a contingent of hussars, crossed the Timiş River nearby to scout for the presence of the Ottoman Turks. There was no sign of the Ottoman army, but the hussars did run into a group of Gypsies, who offered to sell schnapps to the war-weary soldiers. The cavalrymen bought the schnapps and started to drink.
Soon afterwards, some infantry crossed the river. When they saw the party going on, the infantry demanded alcohol for themselves. The hussars refused to give them any of the schnapps, and while still drunk, they set up makeshift fortifications around the barrels. A heated argument ensued, and one soldier fired a shot.
Immediately, the hussars and infantry engaged in combat with one another. During the conflict, some infantry began shouting "Turcii! Turcii!" (Romanian for "The Turks! The Turks!"). The hussars fled the scene, thinking that the Ottoman army’s attack was imminent. Most of the infantry also ran away; the army comprised Italians from Lombardy, Slavs from the Balkans, and Austrians, plus other minorities, many of whom could not understand each other. While it is not clear which one of these groups did so, they gave the false warning without telling the others, who promptly fled. The situation was made worse when officers, in an attempt to restore order, shouted "Halt! Halt!" which was misheard by soldiers with no knowledge of German as "Allah! Allah!".
As the cavalry ran through the camps, a corps commander reasoned that it was a cavalry charge by the Ottoman army, and ordered artillery fire. Meanwhile, the entire camp awoke to the sound of battle and, rather than waiting to see what the situation was, everyone fled. The troops fired at every shadow, thinking the Ottomans were everywhere; in reality they were shooting fellow Austrian soldiers. The incident escalated to the point where the whole army retreated from the imaginary enemy, and Holy Roman Emperor Joseph II was pushed off his horse into a small creek.
Two days later, the Ottoman army arrived. They discovered 10,000 dead and wounded soldiers.