After Emperor Gengshi Liu Xuan took command of the Green Woods Army, he first ordered Liu Xiu to lead the majority of troops to attack Wancheng, then commanded Wang Feng and Wang Chang to march north and capture Kunyang (present-day Ye County, Henan), Dingling (northeast of present-day Wuyang, Henan), and Yancheng (south of present-day Yancheng, Henan), clearing obstacles around Wancheng to ensure Liu Xiu's campaign went smoothly.
As the Lulin Army launched attack after attack, more and more territories fell under their control. Wang Mang watched with growing anxiety, realizing that the Lulin Army had reached a point where they must be eliminated—if left unchecked, the consequences would be disastrous. Initially, Wang Mang had focused all his suppression efforts on the Red Eyebrows Army, but now he decided to strike the Lulin Army first. In March of the year 23 AD, Grand Minister of Works Wang Yi and Grand Minister of Education Wang Xun, under Wang Mang's orders, led over 400,000 soldiers toward Kunyang, aiming to wipe out the main forces of the Lulin Army. The Lulin troops defending Kunyang numbered no more than 8,000 to 9,000 men, while Wang Yi and Wang Xun brought 100,000 troops, and with the addition of Yan You and Chen Mao's forces, their strength surged dramatically.
The Green Woods Army was terrified—how could a few thousand men possibly withstand an army of one hundred thousand? Panic spread through Kunyang, and some even suggested abandoning the city and fleeing. Liu Xiu firmly opposed retreat, explaining the situation in detail: Wancheng had not yet fallen, and Kunyang must not be allowed to fall into Wang Mang's hands. Yet some still insisted on abandoning the city. As the debate raged, Wang Mang's forces drew near Kunyang. Only then did everyone realize that if they did not quickly decide on a battle plan, they would all be killed by Wang Mang's army, so no one opposed Liu Xiu's proposal any longer. Liu Xiu ordered Wang Feng and Wang Chang to defend Kunyang, while he took Li Yi and Zong Tiao to Yixian and Dingling to gather more reinforcements for Kunyang.
Wang Mang's general, Yan You, surveyed the surroundings of Kunyang City and quietly pondered how to capture it in the shortest time with the fewest troops. Although Kunyang City was not large, it held a strong geographical advantage. Yan You believed they should first attack Wancheng, cut off Kunyang's retreat, and eliminate most of the Green Forest Army's forces. Once the Green Forest Army in Kunyang saw the dire situation, they would naturally lose their fighting spirit, allowing the Wang Mang forces to take the city easily. However, General Wang Yi scoffed at Yan You's suggestion. Wang Yi, ignorant of military strategy yet pretending to be knowledgeable, ignored others' advice and insisted on attacking Kunyang first. Relying on his abundant troops, he ordered his soldiers to slaughter mercilessly, vowing to make the streets of Kunyang flow with blood. Yan You repeatedly objected, but Wang Yi overruled him. Under Wang Yi's command, the Wang Mang forces besieged Kunyang so tightly that not a drop of water could seep through, and the Green Forest Army saw only a sea of heads outside the city. The two sides confronted each other for days and nights, clashing several times, with the Wang Mang forces clearly gaining the upper hand. Wang Feng, the leader of the Green Forest Army, could no longer hold out and begged Wang Yi for mercy, offering to surrender if the attack ceased. But Wang Yi, eager for glory, insisted on waiting until every last Green Forest soldier was dead. Hearing this, the Green Forest Army's officers and soldiers grew furious, rallied their morale, and resolved to fight Wang Yi to the end. Since begging for mercy offered no chance of survival, they decided to resist desperately, hoping for a possible victory. Thus, Wang Feng led the Green Forest Army in continued combat against the Wang Mang forces, and the city's residents, moved by the Green Forest Army's bravery, joined the soldiers in resisting the enemy.
The fierce attacks by Wang Mang's army were stubbornly resisted by the Green Forest Army. At this point, Yan You again suggested to Wang Yi that they deliberately open a gap in the encirclement, making the Green Forest Army think Wang Mang's forces had been careless, giving them a chance to escape. Yan You said that once the Green Forest Army fled, Wang Mang's troops could spread word that Kunyang City had been captured, which would surely intimidate the Green Forest Army holding Wancheng, allowing them to take both Kunyang and Wancheng in one fell swoop. This suggestion was again rejected by Wang Yi, who insisted on capturing Kunyang City by force to demonstrate how formidable his army was. Not only was Wang Yi arbitrary in formulating battle strategies, but he also frequently left the camp to extort money from local officials and wealthy merchants in surrounding counties, which increasingly tarnished the image of Wang Mang's army in the eyes of the people.
Liu Xiu, along with Li Yi and Zong Tiao, assembled a large army near Dingling to prepare for the relief of Kunyang, but many generals declared they would go no further halfway, intending to station their troops in areas rich in resources, believing that ample food and drink mattered far more than the victory of the immediate battle. Liu Xiu admonished them, saying that winning the battle would bring even greater spoils, and if they did not rush to support Kunyang now, once it fell, Wang Mang's army would gain immense morale, inevitably inflicting irreparable harm on the Green Woods Army—at which point, even if they held treasures in their hands, what use would they be if they lost their lives? Hearing this, the generals suddenly came to their senses and promptly led their soldiers to follow Liu Xiu and Li Yi as they hurried toward Kunyang.
The relief forces finally arrived at Kunyang in June, lining up in a single formation and advancing menacingly toward Wang Mang's army outside the city walls. Wang Yi and Wang Xun completely dismissed Liu Xiu's reinforcements, considering them utterly insignificant compared to their own hundred-thousand-strong army, so they ordered only a few thousand men to engage. Unexpectedly, under Liu Xiu's leadership, the relief troops fought with increasing ferocity, and within moments, over a thousand of Wang Yi's soldiers were cut down.
Just as the Green Woods Army in Kunyang was celebrating with cheers and shouts, the city of Wancheng, which had been besieged by the Green Woods Army for a long time, finally fell. Wang Mang's forces had not sent reinforcements to Wancheng, and the defending general Cen Peng, seeing his starving soldiers, had no choice but to abandon resistance and surrender to the Green Woods Army. However, this news had not yet reached Kunyang, and neither Liu Xiu nor Wang Yi knew about it. But to encourage his soldiers to fight bravely, Liu Xiu deliberately spread a rumor, claiming that the Green Woods Army had already seized Wancheng from Wang Mang's forces. When Wang Yi heard this, he was greatly shocked, and Wang Mang's soldiers also sighed in despair, thinking only of returning home quickly, having lost all will to fight.
After the initial victory, in order to end the battle as quickly as possible, Liu Xiu planned to eliminate the most critical part of Wang Mang's army—the command center where Wang Yi and Wang Xun were stationed. Liu Xiu selected three thousand brave and skilled soldiers from his forces and secretly circled around from the west of Kunyang City. Wang Yi and Wang Xun saw through Liu Xiu's plan, but they still dismissed it lightly, leading ten thousand troops to confront Liu Xiu while ordering the rest to stay in camp and not assist without their command. Although Liu Xiu's soldiers were few, each could fight ten enemies, while Wang Mang's army had lost morale and had no heart for battle. Under the fierce assault of the Green Forest Army, Wang Mang's forces retreated step by step. Those in the camp wanted to help, but without orders from Wang Yi and Wang Xun, they could only watch anxiously. Soon, Liu Xiu destroyed Wang Mang's command center, killing Wang Xun. Seeing that Wang Yi's cause was lost, the Green Forest Army, which had been watching the situation from within Kunyang City, quickly opened the city gates and charged out to fight. Caught between two sides and with one of their leaders dead, Wang Mang's soldiers abandoned the fight and fled in all directions. At that moment, the weather turned with thunder, rain, and howling winds. The panicked Wang Mang's army was chased breathlessly by the Green Forest Army; many were trampled to death in the chaos, bodies lay everywhere, and some drowned in the river, with corpses piling up so high that they even blocked the flow of the water.
Generals Wang Yi and Yan You led the remnants of their defeated troops back to Luoyang. Upon hearing the news of the defeat, Wang Mang was deeply shocked. The main force of Wang Mang's army had been completely annihilated by the Lülin Army at the Battle of Kunyang, and Liu Xiu's correct leadership and calm, wise thinking were undoubtedly key factors in the Lülin Army's victory.
After the Battle of Kunyang, internal conflicts arose within the Lulin Army. Emperor Gengshi, Liu Xuan, fearing that the growing power of the brothers Liu Yan and Liu Xiu would threaten his own position, had Liu Yan killed on false pretenses with the help of others. Liu Xiu pretended to submit to Liu Xuan, acting with extreme caution in every word and deed, eventually gaining Liu Xuan's trust and being granted the title of Marquis of Wuxin, which laid the foundation for his later establishment of the Eastern Han Dynasty.