When the Second Sino-Japanese War fully broke out in 1937, Dai had been promoted to a brigade commander. He fought in many battles including at Taierzhuang and Wuhan, and was promoted to deputy commander of the 89th Division and then commander of the 200th Division. In December 1939, Dai commanded the 200th Division on the front line of the Battle of Kunlun Pass and successfully defended the pass against Japanese attack. Severely wounded in the battle, he returned to the unit after undergoing more than a month of medical treatment.