The 101st Airborne formed an all-round perimeter using the 502nd PIR on the northwest shoulder to block the 26th Volksgrenadier, the 506th PIR to block entry from Noville, the 501st PIR defending the eastern approach, and the 327th GIR scattered from Marvie in the southeast to Champs in the west along the southern perimeter, augmented by engineer and artillery units plugging gaps in the line. The division service area to the west of Bastogne had been raided the first night, causing the loss of almost its entire medical company, and numerous service troops were used as infantry to reinforce the thin lines. CCB of the 10th Armored Division, severely weakened by losses to its Team Desobry (Maj. William R. Desobry), Team Cherry (Lt. Col. Henry T. Cherry), and Team O'Hara (Lt. Col. James O'Hara) in delaying the Germans, formed a mobile 'fire brigade' of 40 light and medium tanks (including survivors of CCR 9th Armored Division and eight replacement tanks found unassigned in Bastogne).
Three artillery battalions were commandeered and formed a temporary artillery group. Each had twelve 155 mm (6.1 in) howitzers, providing the division with heavy firepower in all directions restricted only by its limited ammunition supply. Col. Roberts, commanding CCB, also rounded up 600+ stragglers from the rout of VIII Corps and formed Team SNAFU as a further stopgap force.
As a result of the powerful American defense to the north and east, XLVII Panzer Corps commander Gen. von Lüttwitz decided to encircle Bastogne and strike from the south and southwest, beginning the night of 20/21 December. German panzer reconnaissance units had initial success, nearly overrunning the American artillery positions southwest of Bastogne before being stopped by a makeshift force. All seven highways leading to Bastogne were cut by German forces by noon of 21 December, and by nightfall the conglomeration of airborne and armored infantry forces were recognized by both sides as being surrounded.
The American soldiers were outnumbered approximately 5-1 and were lacking in cold-weather gear, ammunition, food, medical supplies, and senior leadership (as many senior officers, including the 101st's commander—Major General Maxwell Taylor—were elsewhere). Due to the worst winter weather in memory, the surrounded U.S. forces could not be resupplied by air nor was tactical air support available due to cloudy weather.
However, the two panzer divisions of the XLVII Panzer Corps—after using their mobility to isolate Bastogne, continued their mission towards the Meuse on 22 December, rather than attacking Bastogne with a single large force. They left just one regiment behind to assist the 26th Volksgrenadier Division in capturing the crossroads. The XLVII Panzer Corps probed different points of the southern and western defensive perimeter in echelon, where Bastogne was defended by just a single airborne regiment and support units doubling as infantry. This played into the American advantage of interior lines of communication; the defenders were able to shift artillery fire and move their limited ad hoc armored forces to meet each successive assault....
The most famous quote of the battle came from the 101st’s acting commander, Brigadier General Anthony McAuliffe. When confronted with a written request from German General Luttwitz for the surrender of Bastogne, his reply was one word: "NUTS!" (the commander of the 327th GIR interpreted it to the German truce party as "Go to hell!"). After the battle, newspapers referred to the division as the "Battered Bastards of Bastogne".
The 101st Airborne Division's casualties from 19 December 1944 to 6 January 1945 were 341 killed, 1,691 wounded, and 516 missing. The 10th Armored Division's CCB incurred approximately 500 casualties.