Maxim was reported to have said: "In 1882 I was in Vienna, where I met an American whom I had known in the States. He said: 'Hang your chemistry and electricity! If you want to make a pile of money, invent something that will enable these Europeans to cut each others' throats with greater facility' ".

As a child, Maxim had been knocked over by a rifle's recoil, and this inspired him to use that recoil force to automatically operate a gun. Between 1883 and 1885 Maxim patented gas, recoil and blow-back methods of operation. After moving to England, he settled in a large house formerly owned by Lord Thurlow in West Norwood where he developed his design for an automatic weapon, using an action that would close the breech and compress a spring, by storing the recoil energy released by a shot to prepare the gun for its next shot. He thoughtfully ran announcements in the local press warning that he would be experimenting with the gun in his garden and that neighbours should keep their windows open to avoid the danger of broken glass.

Maxim founded an armaments company to produce his machine gun in Crayford, Kent, which later merged with Nordenfeldt and the Vickers Corporation in 1896, becoming 'Vickers, Son & Maxim'. Their updated design, referred to as the Vickers gun after Maxim's resignation from the board in 1911 on his 71st birthday, was the standard British machine gun for many years. With arms sales led by Basil Zaharoff, variants of the Maxim gun were bought and used extensively by both sides during World War I.

In his later years Maxim became profoundly deaf, as his hearing had been damaged by years of exposure to the noise of his guns.