The 41st Army advanced into Ningxia in January 1934, overcoming the 10,000 soldiers that Ma Hongkui had already stationed at the border. Sun Dianying proceeded to set up a rival provincial government in Shizuishan, openly declaring his intention to conquer the entire province. Governor Ma Hongkui promptly mobilized his remaining forces, namely his capable Muslim cavalry, as well as infantry troops of much worse quality including spearmen. Other Ma clan members, most importantly Ma Hongbin, Ma Bufang, and Ma Zhongying, sent reinforcements from Gansu and Qinghai. Meanwhile, Chiang Kai-shek knew that he had lost control over Sun, and started to publicly state his support for the Ma clique. He also ordered the mobilization of Yan Xishan's Shanxi Army as well as the Nationalist armies in Suiyuan and Gansu under his loyal follower Zhu Shaoliang against Sun. Chiang hoped that by involving these non-Ma forces in the conflict, he could prevent the Ma clique from single-handedly winning the conflict and thus becoming even stronger than before.

Following its consolidation at Shizuishan, the 41st Army began to advance on Ningxia's capital Yinchuan. Although harassed by the Ma cavalry, Sun's battle-hardened troops managed to advance up to Likangpu, just 13 miles from the capital, before being stopped on 24 January. Soon after, the 41st Army almost managed to defeat Ma Hongkui's army at Pingluo County, but was still unable to capture Yinchuan. Unable to break through, Sun's army grew weaker as casualties mounted, while an increasing number of Ma reinforcements arrived in the province and started to tip the balance in favor of Ma Hongkui. By the end of January, the Ma forces started a major counter-offensive, and the 41st Army began a fighting retreat. At this point, Ma Hongkui even enjoyed the support of the Nationalist Air Force, as Chiang Kai-shek had sent a small number of light bombers and a reconnaissance plane to Ningxia. On 30 January, the Executive Yuan officially stripped Sun of his title as Reclamation Commissioner of Qinghai. The 41st Army was "catastrophically defeated" by the Ma armies in March, and its route of retreat was cut when Yan Xishan's Shanxi Army and the Nationalist Suiyuan army captured Dengkou County. Knowing that he was defeated, Sun surrendered to Yan after mediations by Pang Bingxun in April 1934.

Following Sun's surrender, Yan Xishan offered the 41st Army's surviving soldiers the opportunity to join his own army and most accepted. Yan also gave Sun Dianying a modest estate in Taiyuan, where he was supposed to retire peacefully. Nevertheless, Sun was appointed "high military advisor" for the Military Affairs Commission's Beiping branch by the Nationalist central government in May 1934. When interviewed by Reuters, Sun gave his "meritorious services" to the central government as reason for his appointment. He continued to serve in the NRA for the rest of the Nanjing decade, and again rose to army command in the Second Sino-Japanese War, eventually defecting to the Japanese in 1943.

The war in Ningxia damaged the reputation of the Nationalist government, as it showcased Chiang Kai-shek's political opportunism. Despite this, the Nationalists continued to try to strengthen their position in the northwestern provinces through similar strategies in the following years with minimal success. The Ma warlords ruled their territories until they were defeated by the Communist People's Liberation Army in the late stages of the Chinese Civil War.