Microwave sources based on backward‐wave oscillators (BWO’s) driven by relativistic electron beams are capable of producing high‐power coherent radiation in the cm and mm wavelength region. When the axial magnetic field used in these devices to confine the electron beam satisfies the condition of cyclotron resonance there is a significant modification in the behavior of BWO due to beam coupling to cyclotron modes. In this paper a time‐dependent, self‐consistent theory of BWO’s is developed, taking into account a possible cyclotron interaction. The analysis of the system near the cyclotron resonance yields the power drop due to the cyclotron absorption effect observed in many BWO experiments. In addition, the theory predicts that there exists a region of magnetic field strength, where an increase in power and efficiency is possible. Depending on the value of the magnetic field and beam coupling to cyclotron mode various regimes of BWO operation are possible, including stable single‐frequency oscillations, self‐modulation, and a succession of microwave bursts.