The Collaborative International Dictionary of English v.0.48:

Sepoy \Se"poy\, n. [Per. sip[=a]h[imac], fr. sip[=a]h an army.
   Cf. Spahi.]
   A native of India employed as a soldier in the service of a
   European power, esp. of Great Britain; an Oriental soldier
   disciplined in the European manner.
   [1913 Webster]