The Covenant suffered a major military defeat at Installation 04. Here, the Human survivors from the Halcyon-class light cruiser Pillar of Autumn formed an effective resistance to the Covenant forces in-system. Unwilling to risk damaging the sacred ring, the Covenant was forced to fight the Humans on Halo's surface rather than using its usual glassing tactics. The Covenant found the Humans very adept at fighting on the surface, employing their firearms and vehicles in classic guerrilla raids. Unable to counter the tactics employed by the Humans, the Covenant was defeated again and again, including one instance when humans boarded their grounded cruiser, the Truth and Reconciliation, and successfully escaped with a group of captives, including the captain of the Pillar of Autumn, Captain Jacob Keyes. The battle on Halo then suddenly took a turn for the worst for both sides when the Covenant accidentally released an ancient and deadly parasitic race called the Flood. The Flood, having been imprisoned within Halo for many thousands of years, spread quickly throughout the ring, killing or assimilating every unsuspecting human and Covenant in their path.
During the course of the battle, the Spartan-II known as John-117 discovered the true nature of Halo and proceeded to detonate the crashed Pillar of Autumn's engines, destroying the ring, and escaped, much to the Covenant's dismay. Not only had the Covenant war machine been denied victory, a sacred artifact of the gods themselves had been destroyed. The result of the battle devastated Covenant morale in the short term. The destruction of Halo and the later loss of the flagship Ascendant Justice to the surviving UNSC forces led to Supreme Commander Thel 'Vadamee being disgraced and demoted before being branded with the Mark of Shame, leaving him dead in the eyes of the Sangheili. Only the intervention of the Prophet of Truth prevented 'Vadamee's certain execution. He was instead given the rank of Arbiter and sent to quell a Heretic uprising that had taken root on the Gas Mine around Threshold.
Shortly after the defeat at Halo, the Covenant had amassed a large fleet consisting of five hundred Jiralhanae-led warships, apparently intended to assault Earth directly. The Covenant discovery of Earth was an accident after the Pious Flea had been intercepted by the UNSC stealth ship Apocalypso. After retrieving a Forerunner artifact, Apocalypso made a Slipspace jump directly to Earth. When the ship tumbled into real space and crashed on the moon, the Pious Flea sent a message to the heart of the Covenant military, containing reconnaissance data, photos, star maps, and the coordinates of the Forerunner Artifact, which was now on Earth. However, the Covenant had not identified Earth as the Human home world, and the Unyielding Hierophant's fleet was never expressly identified as an invasion force; this is merely a reasonable assumption made by the Human forces upon discovery of the fleet's destination of Sol.
This leaves the exact nature of the fleet's mission uncertain, as there is no definitive proof that the Covenant were intending to attack their enemy's home world. Nonetheless, the human survivors of Installation 04 correctly assessed the fleet to be a direct threat to Earth, and, using a captured Covenant flagship, lured the armada into a trap and destroyed it.
A few weeks after this defeat, the Prophet of Regret led a small fleet of fifteen ships to Earth in order to locate a Forerunner artifact known as the "Ark." Though hopelessly outgunned by the UNSC's new orbital defense grid of MAC guns, the Prophet of Regret's flagship managed to break through the Human defenses to New Mombasa. The Covenant ground troops quickly spread through the city, destroying both military and civilian resistance. When a counter-attack by the Marines and John-117 inflicted heavy losses Regret was forced to flee, leaving his fleet to burn. His carrier jumped into Slipspace from within the city, damaging it severely.
Unfortunately for Regret, four Human ships, In Amber Clad among them, had followed them through their own Slipspace rupture to Installation 05. With the orders "Find out why he came to Earth; why he came here," John-117 was hard-dropped with a complement of Orbital Drop Shock Troopers to Delta Halo's surface. Led by John, the Humans forced their way through Regret's forces until they had reached the Prophet himself. At that moment, High Charity, having learned of Delta Halo, arrived and launched multiple waves of Phantom dropships to aid Regret. However, they were withdrawn by the Prophet of Truth as part of his plan to remove the Sangheili from power in the Covenant. However, Truth had perhaps underestimated the full impact his 'reforms' would have on the Covenant's military campaign. John-117 ultimately assassinated Regret, dealing a heavy blow to the Empire's political structure. The Prophet of Truth then gave the order to glass the temple in which Regret was residing. John-117 barely escaped, only to be captured by the Gravemind.
Meanwhile, the majority of the Human forces on In Amber Clad had traveled to Delta Halo's Library to obtain the Index, the key to a successful firing of the Halo array. Originally, the Covenant had been unaware of the Index's importance. Fortunately, Arbiter Thel 'Vadamee had obtained 343 Guilty Spark, the monitor of Installation 04, while destroying the Heretic base. The monitor, known to the Covenant as an Oracle, told the Prophets of the Index and the Arbiter was sent to retrieve the "Sacred Icon." The mission was complicated though by the unexpected release of the Flood. Despite this, the Arbiter successfully reached the Library and prevented the Humans from claiming the Index, kidnapping Miranda Keyes and Sgt. Johnson. However, the Index was stolen from the Arbiter by the Jiralhanae Chieftain Tartarus, who was under the Prophets' orders to retrieve the Index, and kill the Arbiter. Although unsuccessful at the latter goal, with the Index secure, the Prophets then ordered the Jiralhanae to begin eradicating the Sangheili, thus beginning the Covenant Civil War. Ultimately this led to the death of Tartarus at the hands of Vadamee and Johnson. A temporary alliance was formed between the Separatists and the Human forces. Delta Halo was prevented from firing by Miranda Keyes and in the chaos of High Charity, the Flood infested the Prophet of Mercy, leaving the Prophet of Truth firmly in control over the Covenant.