Karaczay proved his mettle during the Austro-Turkish War, earning fame and distinction. He participated in the 1788 Siege of Khotyn. He was promoted to oberst (colonel) in 1788. On 19 April 1789, he led two squadrons each of the "Kaiser" Chevau-léger Nr. 1, "Barco" Hussar Nr. 35, and "Levenehr" Dragoon Nr. 19 Regiments, six companies of the "Kaunitz" Infantry Regiment Nr. 20, and four field pieces in action at Valea Seacă (Vályeszáka). That day, his troops defeated 5,000 Ottoman cavalry, capturing several flags and a number of enemy soldiers. He fought at the Battle of Focșani on 1 August 1789 and the Battle of Rymnik (Martinestje) on 22 September.