Background
MacMahon assembled the Ulster army in Loughgall in south Armagh, with 4000 infantry and 600 cavalry. They were, however short of ammunition and over half of their men carried pikes rather than muskets (whereas the norm at the time was one pike for two muskets). His aim was to march through the centre of Ulster and drive a wedge between Coote's garrison at Derry in the west of province and Venables' command at Carrickfergus in the east. With the Parliamentarian troops tied down by the activities of Irish guerrillas or "tories", the Ulster army marched up to Ballycastle on the northern coast of Ulster and left a string of garrisons along the centre of the province. They then marched west, towards Coote's army , which was in Lifford, near Derry. Fending off an attack by the English cavalry as they crossed the river Finn, the Irish encamped on a mountain side at Scarrifholis, south of Letterkenny along the road to Donegal town and near the river Swilly. The local Protestant population fled to the fortified towns in the area, as the war in Ulster had, from its outset, been characterised by atrocities committed against civilians by both sides. Meanwhile, Parliamentarian reinforcements had joined Coote from eastern Ulster, bringing his forces up to 3000 men, compared to 4000 Irish. However, the British force had more ammunition and more cavalry than their enemies. MacMahon's officers warned him not to leave their strong defensive position and risk battle, as the Parliamentary army was tactically superior to them. Rather, they should stay put and wait for the enemy to disperse when their supplies ran out, leaving the Irish free to march back to their stronghold along the border with Leinster. MacMahon however refused to listen to military advice and ordered his troops down from their mountain camp to give battle to the Parliamentary army.

The battle
The battle was a decisive victory for Coote and British Parliamentarians. Over 3000 of the Ulster army were killed – 2000 on the field and another 1000 in the pursuit – about 75% of their total numbers. The Parliamentarians lost only around 100 soldiers killed. Coote ordered that Irish wounded and prisoners taken were to be killed, including Henry O'Neill, Owen Roe O'Neill's son, who had surrendered on terms. MacMahon was captured a week later at Enniskillen and hanged.
The battle marked the destruction of the Ulster army, not only because of the loss of manpower, which could be replaced, but because of the loss of many experienced officers and virtually all their weapons and equipment, which could not. In addition to O'Neill and MacMahon, the Irish lost 9 colonels, 4 lieutenant colonels, 3 majors, 20 captains and hundreds of other junior officers. This represented a huge cull of the Ulster Irish Catholic land-owning class, far bigger than in the famous Flight of the Earls in 1607. For this reason, the battle has been described as "Ulster's Aughrim" – a battle marking the extermination of the province's native aristocracy and assuring the continued existence and supremacy of its Protestant settler population.
Coote went on to march south, taking Sligo and then Galway after a long siege in 1652. The surrender of this city marked the effective end of the Irish resistance to the Cromwellian conquest of Ireland.