The decline in Sasanid power following the deposition of Khosrow II was dramatic and caused by many factors, ranging from the financial and military exhaustion that resulted from the wars with Byzantium to bloody disputes over the succession to the throne to continuing popular unrest. Just when it appeared stability might be restored with the accession of Yazdgerd III in a.d. 634, a grave new threat appeared from an unexpected direction. Newly unified by the Prophet Mohammad and the religion of Islam, the Arabs of the Hejâz and the Bedouin of the Arabian Peninsula joined forces with other tribes and disaffected groups in the Iranian-ruled areas of Mesopotamia to thwart the Sasanid revival. After a period of skirmishing, a decisive pitched battle took place over a period of four days in a.d. 636 at a place known as Qâdesiyeh (near modern Kufa in Iraq). The Iranian general—named, ironically, Rostam—was killed, the Iranian army was routed, and the fabled Banner of Kâveh fell into the hands of the Arabs. Since the Sasanid capital was not far away, it was promptly captured and its vast treasures were looted by the conquerors. The Sasanids never recovered from this disaster, and, after the failure of a last-ditch stand at the Battle of Nehâvand ( a.d. 642), virtually the whole of Iran was occupied; Yazdgerd was murdered by one of his vassals in a.d. 652 in central Asia, apparently on his way to seek help from China against the Arabs. For more than a century, Iran would be little more than a set of provinces in the Islamic Empire of the caliphs of Medina, Damascus, and Baghdad.

Of all the foreign invasions of Iran, that of the Muslim Arabs was arguably the most disruptive and far-reaching in its effects. It entailed not only military defeat, the destruction of the ancient regime, and political subjection, but also led to colonization by some Arab settlers and considerable social and cultural change, most obviously in the collapse of Zoroastrianism as the national religion and the spread of Islam as the dominant faith in Iran (to be discussed in more detail in the next chapter). However, the perception that all this amounts to a major discontinuity in Iranian history should not be exaggerated. Some areas of Iran, especially in the rugged Alborz area, remained autonomous under local dynasties, even after accepting Islam. Elsewhere, Iranians played an increasingly important role in political affairs: The revolution which overthrew the Umayyad Dynasty of caliphs and established the Abbasid Dynasty began in Iran under the command of an Iranian leader, Abu Moslem Khorâsâni, and with the support of much of the Iranian population. Thereafter, Iranians served in the highest echelons of the Abbasid administrative, military, and scholarly elites. Iranians also had had long practice at incorporating aspects of the culture of their non-Iranian neighbors while retaining their own identity, and this continued to be the case. Iranians distinguished themselves in virtually every field of learning and culture: law, theology, philosophy, medicine, astronomy, and even Arabic literature and philology—some of the first Arabic grammarians were of Iranian ancestry, and one of the first and most skilled practitioners of formal Arabic literary prose was an Iranian, Ebn al-Moqaffa‘. At the same time, many aspects of the ancient Iranian culture, such as the New Year festival, survived and were even adopted by non-Iranian people. Most important, and contrary to what happened in most other areas conquered by the Muslim Arabs, the general population in Iran did not accept the language of the conquerors; they adopted the Arabic script and borrowed a good deal of Arabic vocabulary, but the common language, spoken at first and then used as a literary language, became New Persian, a tongue based on the ancient Iranian languages.

Not surprisingly, the attitude of Iranians over the years regarding these developments has thus been highly ambivalent: They were often rankled by the fact that the humiliation of imperial Iran had come at the hands of people it had held in the lowest esteem, the so-called lizard-eating nomads of the desert. On the other hand, they embraced the new religion and took great pride in Iranian contributions to the development of a new, cosmopolitan Islamic civilization.

With the weakening of the power of the Abbasid caliphs from the late ninth century onward, more areas of Iran became essentially independent, under the rule of hereditary dynasties of Iranian origin. In a.d. 861, for example, a coppersmith ( saffâr ) named Ya‘qub-e Lays, took command of a kind of popular militia (the ayyârân ) in Sistân. An effective and popular leader, Ya‘qub raided non-Islamic areas on the frontier with India, defeated the pro-Abbasid governor of Khorâsân, and forced the caliph to recognize him as governor of the provinces Kermân, Fârs, and Khuzestân. In a.d. 876, he invaded Iraq and briefly threatened Baghdad itself. The dynasty he founded, the Saffarids, remained a power in southwestern Iran until a.d. 1003. In addition to being militantly anti-Abbasid in his politics, Ya‘qub also championed Iranian culture. He himself did not understand Arabic and consequently had his poets praise him in the Persian language. In contrast, the Samanid Dynasty, which ruled in Khorâsân and central Asia (ca. a.d. 874–999), professed to be governing on behalf of the Abbasid caliphs and supported Arabic scholarship. They resisted the expansion of the Saffarids and adopted an aggressive policy to defend against the Turkish nomads on their frontier, supplying Turkish slaves to the caliphs. Yet they too acted as independent rulers, were proud of their Iranian identity (claiming descent from Bahrâm Chubin), and promoted the revival of Persian as a literary language by sponsoring translations of famous Arabic works into Persian. Another dynasty of Iranian origin, the Buyids, came to power in western Iran (ca. a.d. 932–1055), conquered Baghdad, and ruled as de facto masters of the Abbasid caliphs.