However, with victory in his grasp, Cyrus was slain and his Asian mercenaries fled the field in disarray. The Greeks remained undefeated and refused to surrender. During negotiations, their generals were treacherously murdered, leaving them leaderless. Xenophon was among the new commanders immediately elected. He played an important role as the "Ten Thousand," as they were later known, fought their way northward through Kurdistan and Armenia to the Greek port of Trapezus on the Black Sea. Their five-month, 1,500-mi (2,414-km) trek revealed the essential internal weakness of the Persian Empire.

Xenophon continued leading the Ten Thousand. They fought in Bulgaria for the Thracian prince Seuthes before returning to Asia Minor in 399 B.C. with a force of Spartans. There, they defended the Ionian cities against renewed Persian aggression. It was during this time that Xenophon met the Spartan king Agesilaus II (444?-360 B.C.), whom he admired greatly. He returned to Sparta with Agesilaus and served on his staff. He was present at the Battle of Coronea (394 B.C.) when the Spartan king defeated a coalition of Greek cities that included Athens. Shortly thereafter, Xenophon was banished from Athens as a traitor.

In gratitude for his services, Sparta rewarded Xenophon with an estate at Scillus, near Olympia. He married, had two sons, and devoted his leisure time to hunting, entertaining friends, and writing. After Thebes defeated Sparta at the Battle of Leuctra (371 B.C.), Xenophon sought refuge in Corinth. When his banishment was revoked (365? B.C.), he may have returned to Athens. In any case, both his sons were educated there, and the oldest died at Mantinea (362 B.C.) fighting for Athens.

Aside from Anabasis, Xenophon's most important work was Hellenica, which was intended as a continuation of Thucydides's History of the Peloponnesian War, covering the period from 411 to 363 B.C. He wrote various Socratic dialogues and compiled his recollections of Socrates in Memorabilia. His other works include Cyropaedia, a hagiography of Cyrus the Great; Peri hippikes and Hipparchicus, manuals on horsemanship and cavalry tactics; Cynegeticus, a treatise on hunting; and Agesilaos, an encomium of Agesilaus. Peri poron, a pamphlet dealing with Athen's financial difficulties, was written shortly before his death around 355 B.C.