After Khan's imprisonment in 2002, his son-in-law, Maulana Fazalullah, a former chairlift operator, took over the TNSM at age 28. By 2007 he had aligned himself with the hardline Tehrik-e-Taliban Pakistan (TTP), setting up dozens of illegal radio stations in Swat from which he preached his message of jihad (holy war).

Fighting in Swat began after Fazalullah in July 2007 ordered supporters to avenge a security force operation to clear militants out of the Red Mosque (Lal Masjid) in Islamabad. Since then, paramilitary forces and the Pakistan army have fought militants led by Fazalullah. A brief truce in May 2008 brought relative peace but fighting resumed in August. Some 4,000 militants are said to be battling 12,000 troops. Although the militants in Swat enjoy support from militants in tribal areas they are not directly linked to them.

There is no independent confirmation of the number of casualties. In January 2009, the military said 142 soldiers and paramilitary troops had died since August 2008. In 2007, the military confirmed the deaths of 230 civilians and 90 military personnel. At the end of 2007, the Human Rights Commission of Pakistan (HRCP) in Swat said at least 400 civilians had died and 1,000 houses were destroyed.

According to rights groups and the media, approximately 800,000 of Swat's 1.8 million people have fled. With intensified fighting from February 2009, as the Pakistan government promised to retake control of the valley from the militants, more people are reported to have left. Camps for internally displaced persons have been set up in Mingora and elsewhere by the provincial government.