He took power during a festival of Hera with his brothers Pantagnotus and Syloson, but soon had Pantagnotus killed and exiled Syloson to take full control for himself. He then allied with Amasis II, pharaoh of Egypt, as well as the tyrant of Naxos Lygdamis. With a navy of 100 penteconters and an army of 1,000 archers, he plundered the islands of the Aegean Sea and the cities on the Ionian coast of Asia Minor, defeating and enslaving the navies of Lesbos and Miletus. He also conquered the small island of Rhenea, which he chained to nearby Delos as a dedication to Apollo.
He had a reputation as both a fierce warrior and an enlightened tyrant. On Samos he built an aqueduct, a large temple of Hera (the Heraion, to which Amasis dedicated many gifts), and a palace later rebuilt by the Roman emperor Caligula. In 522 BC he celebrated an unusual double festival in honour of the god Apollo of Delos and of Delphi; it has been suggested that the Homeric Hymn to Apollo, sometimes attributed to Cynaethus of Chios, was composed for this occasion. Polycrates was certainly a patron of the poet Anacreon, and of the Crotonian doctor Democedes.
According to Herodotus, Amasis thought Polycrates was too successful, and advised him to throw away whatever he valued most in order to escape a reversal of fortune. Polycrates followed the advice and threw a jewel-encrusted ring into the sea; however, a few days later, a fisherman caught a large fish that he wished to share with the tyrant. While Polycrates' cooks were preparing the fish for eating, they discovered the ring inside of it. Polycrates told Amasis of his good fortune, and Amasis immediately broke off their alliance, believing that such a lucky man would eventually come to a disastrous end.
It is more likely that the alliance was ended because Polycrates allied with the Persian king Cambyses II against Egypt. By this time, Polycrates had created a navy of 40 triremes, probably becoming the first Greek state with a fleet of such ships. He manned these triremes with men he considered to be politically dangerous, and instructed Cambyses to execute them; the exiles suspected Polycrates' plan, however, and turned back from Egypt to attack the tryant. They defeated Polycrates at sea but could not take the island. They then sailed to mainland Greece and allied with Sparta and Corinth, who invaded the island. After 40 days they withdrew their unsuccessful siege.
Herodotus also tells the story of Polycrates' death. Near the end of the reign of Cambyses, the governor of Sardis, Oroetes, planned to kill Polycrates, either because he had been unable to add Samos to Persia's territory, or because Polycrates had supposedly snubbed a Persian ambassador. In any case, Polycrates was invited to Sardis, and despite the prophetic warnings of his daughter, he was assassinated. The manner is not recorded by Herodotus, as it was apparently an undignified end for a glorious tyrant, but he may have been impaled and his dead body was crucified.