Born on 24 March 1756, Mahmud Shah III is the younger son of the 13th Sultan of Johor, Abdul Jalil Muazzam Shah by his second wife, Tengku Puteh binti Daeng Chelak.^{[citation needed]} To maintain their de facto control of Johor Empire, the Bugis continued to install puppet rulers on the throne, including the infant grandson of Sulaiman Badrul Alam Shah, Mahmud Shah III,^[2] who succeeded on the death of his elder brother, Ahmad Riayat Shah in 1770.^{[citation needed]}

During the early part of his reign, the office of Yamtuan Muda was held by the powerful Bugis chief, Daeng Kemboja. Mahmud Shah III came of age at a time when Bugis-Dutch trade rivalry was intensifying. He exploited the rivalry by concluding a treaty of protection with VOC on board the Utrecht^[2] on 10 November 1784 in which he was accorded the style of 'Most Serene Prince' (Doorlugtigen Vorst).^{[citation needed]}

The treaty called for the end of the Bugis monopoly over the office of Yamtuan Muda and prohibited other Bugis from holding office within Johor's administration. It also demanded the expulsion of all Bugis not born or bred in Riau. Additionally, the treaty allowed the Dutch to post a Resident in Johor. Shortly thereafter. Mahmud Shah III retreated to Pahang. All-out conflict soon erupted between the Dutch and the Bugis. Hostilities between the two powers continued until 1795, when the Dutch finally succeeded in ousting the Bugis chief, Raja Ali from Riau, allowing Mahmud Shah III to return to his capital.^[2]

The same year, however, the Netherlands came under French occupation and the Dutch allowed the British to temporarily take over their territories in the Malay world. This enabled Raja Ali to make a comeback. After the Bugis ousted Tengku Muda, the Malay Yamtuan Muda of Johor, Mahmud Shah III had no choice but to accept Raja Ali's return in 1803. To appease both the Bugis and Tengku Muda, the Sultan married his son, Tengku Hussein, to Tengku Muda's daughter, while his other son, Tengku Abdul Rahman, was made Raja Ali's ward. To maintain his distance from the Bugis, Mahmud Shah III established his capital at Daik, Lingga.^[2]

By the early 19th century, the Pahang and Riau-Lingga began to break up from Johor. Based in Lingga, Mahmud Shah III exercised little power over the Johor Sultanate. This enabled the emergence of a number of powerful chiefs from the same family, such as Temenggong Abdul Rahman (great great grandson of Abdul Jalil Shah IV, second cousins once removed to Mahmud Shah III) and Tun Abdul Majid (grandson of Abdul Jalil Shah IV and first cousins once removed to Mahmud Shah III). Installed in 1806, the Temenggong had de facto control over Johor mainland, Singapore and the islands in the Riau Archipelago.^[3] While in Pahang, Bendahara Tun Abdul Majid became increasingly independent and began carrying the title 'Raja Bendahara' ('King Grand Vizier') of the dominion, following the weakening control from the capital.^[4]

This development had resulted in the sultanate's constituent parts effectively became principalities, and the cultural unity that had hitherto existed between the Malay Peninsula and the islands of Riau-Lingga was gradually destroyed.^[4]

Mahmud Shah III died at Fort Tanna, Bukit Chengah, Lingga on 12 January 1811 and was buried at Masjid Jamie', Daik, Lingga. He died without having named a successor.^[1]

A succession dispute arose between his sons, later ended when the Bugis seized the throne for his younger son, Tengku Abdul Rahman and crowned him in Riau as the next sultan.^[3]

• Ahmad Sarji Abdul Hamid (2011), The Encyclopedia of Malaysia, vol. 16 - The Rulers of Malaysia, Editions Didier Millet, ISBN 978-981-3018-54-9