The son of another István Báthory, the governor of Transylvania for the Habsburg king of Hungary, Stephen entered the service of John Sigismund Zápolya, prince of the newly independent Transylvania, in 1556. He eventually became army commander in chief, and despite Habsburg objections the Hungarians elected him prince of Transylvania in succession to Zápolya on May 25, 1571.

Rejecting the candidature of the Habsburg emperor Maximilian II, the Polish nobility elected Stephen king of Poland in 1575 (Stephen being the son-in-law of the late Sigismund I). Having secured the Transylvanian succession for his brother Christopher, Stephen hurried to Kraków and was crowned on May 1, 1576, but could not totally pacify the country until the end of 1577, when he subdued Gdańsk. Thereafter he was able to face Poland's major enemy, Muscovy, which was attempting to seize an outlet on the Baltic Sea. Securing a truce with Turkey and strengthening the Polish army by enrolling Cossacks on a regular basis, Stephen attacked Tsar Ivan IV the Terrible in 1579 and, concluding the Livonian War (q.v.), forced the cession of Polotsk and Livonia to Poland under the truce of Yam Zapolsky (Jan. 15, 1582).

Though personally tolerant of differing religious views, Stephen, a strong-willed man and a Roman Catholic, encountered considerable resistance from his subjects in his attempts to promote the Counter-Reformation and to strengthen his royal power; but he did not allow his domestic difficulties to prevent his ambitious foreign adventures. His goal was to unite Poland, Muscovy, and Transylvania under his rule. He therefore prepared to renew his war against Russia and was planning to launch a crusade against the Ottoman Empire when he died. He was one of the most forceful and ambitious monarchs in the history of Poland.