The conquest of Islam in seventh century put an end to freedom of religion through out the area. All polytheistic and pagan religions were banned all together with all the other Near and Far Eastern religions. Islam does not recognize these as true religions. All major and minor deities were eliminated as false gods. The house of Kaba contained 110 such deities alone, all were banished. The followers of all these religions became 'kofar ' and were given the choice to either convert or die.

Allah a term used by local Christian tribes, meaning god, became the only sovereign god, the almighty. Islam was the last and the most superior of all religions and Muslim males were made superior to all others including Muslim females. Christianity and Judaism were accepted as the only other true religions and their holy scripts were accepted as such. However despite a large number of Christian and Jewish tribes in Arabia, their freedom was substantially restricted and their legal status lowered.

They were given the right to practice their religion if they paid a discriminatory religious poll tax called 'jizya'. In Quran, these people are called dhimmis (ahle zimmeh); later Zoroastrians of Iran were included as well. Quran prohibits Muslims from becoming friends with Christians and Jews and calls the later liars, dishonest and violent. With Christians they are forbidden from any participation in building Mosques. Mixed marriages were banned for Muslim women. While Muslims could not become slaves, all others were subjected to slavery as purchased slaves or war booty. Later on Christians and Jew were banned from riding horses while carrying arms and could not increase their numbers through conversion of others. They were segregated and their houses should have not exceeded those of the Muslims in height (the Jewish quarter in Kirman is the best example).

Courts of 'Shariat' became the only legal vessel and Quran gave Muslim males superior legal status. For instance if a Jew or a Christian kills a Muslim, there is both 'Ghesas' (Physical punishment) and 'Dyeh' (Monetary compensation). If a Muslim kills a Jew or a Christian, there is no ghesas and they only pay dyeh, which is half of what the Jew or the Christian has to pay. There is no punishment for killing kofar (non-believers) or mortad (converters from Islam into other faiths).

In short all except the Muslim males became second class citizens (dhimmis). 'Covenant of Ummar' when Jerusalem was conquered made religious discrimination an institution. Ummar believed Arabia should be purely Muslim and Arab. The large Christian and Jewish communities of Arabia mainly in Najran, Khaybar, Hijaz and Medina were expelled to the conquered territories and their properties confiscated. His bias, brutality and discriminatory actions contributed to his assassination by a Persian slave.

The situation is worsening by the time of Harun Al Rashid in eight-century AD. The overwhelming population of the area at the time was Christian, Zoroastrian and Jewish. Their houses of worship were destroyed, they could not build any new ones and jizya was increased substantially. Payment of the jizya was furthermore to be accompanied by signs of humility and recognition of personal inferiority.

On payment of the tax a seal, generally of lead, was affixed to the payee's person as a receipt and as a sign of the status of dhimma. By the time of Caliph Al Motevakel in ninth century, non Muslims were all excluded from employment in government sectors, banned from Muslim schools, had to live in closed quarters and were forced to wear colored ribbons to indicate they were non Muslims. Jews had to wear yellow ribbons (Vasleh Johudaneh); a practice that persisted till the end of the 19th century in Iran.

Iran being part of the Greater Muslim Empire was subjected to the same rules. Since non-Muslims were forced out of the government institutions, they went into trade and banking.  A wealthy class of Jewish merchants emerged with cash but little political influence. Later on the money was used by some wealthy Jews throughout the Empire to finance the Caliphs' courts and wars, especially against the Crusaders. Exilarch still remained the vehicle through which Jewish affairs were regulated. The Muslim authorities appointed this figure.

Muslim treatment of the religious minorities varied in accordance with the policies of the caliphs and attitudes of different governors. While the Umayyad governor of Iran Hajjaj was ruthless and extremely biased others were more lenient and did not follow all the discriminatory rules. There were many Christian, Zoroastrian and Jewish Philosophers, physicians,
scientists, engineers, musicians and court administrators in the first century of the Muslim Empire. Later on they all gradually convert or were forced out of government services. The coming of Abbasid improved the position of dhimmi for a while especially during the reign of Al Mansur. He was a devoted follower of the sciences and supported the great translation movement of the 8th century AD.

Initiated by the Syriac, Greek, Jews and Persians to preserve the ancient knowledge, the movement started in Syria and flourished in Baghdad. Scientists and intellectuals from all over got together and thousands of books were translated into Arabic from Greek, Hebrew, Persian and other languages. Iranian Jews were writing dari (new Persian) in Hebrew characters, the same way Christians used Syriac script to write Persian.

Jewish court bankers (Jahabidha) are found at the courts of the Buyids, the Ghaznavids, and the Seljuk Sultans. Malik-Shah Seljuk contracted the farming of his Basra properties to a wealthy Jew named Ibn Allan for 150,000 dinars. The influential politician and educator, Nizam al-Mulk in his famous book Siasat Nameh rejects the employment of dhimmi in governmental services and at the same time provided refuge for his Jewish friend Ibn Allan who was eventually drowned as ordered by the Sultan. Under the Seljuk dhimmis were still segregated in their quarters, paid jizya and wore marked garments. They appointed their own religious officials subject to approval by the Muslim authorities.

The Jews were largely occupied in trade and commerce. The Jewish traveler Benjamin of Tuleda reports large Jewish and Christian communities in many of the larger cities. He visited the area after the death of Sultan Sanjar (1157) and mentions Jewish communities in Hamadan, Isfahan, Nihavand, Shiraz, Nishapur and Baghdad. On the whole there appears to have been little discrimination against the dhimmis other than the usual restrictions. In one incident a prominent Jew, Abu Sad Samha successfully made a claim against Abu Shuja the Minster responsible for dhimmis. He claimed Abu Shuja had failed to protect the Jews and managed to get the Minster sacked. Samha worked for Malik Shah and was a friend of Nizam al-Mulk. At the same time Malik Shah in a new decree made it obligatory for the dhimmis to wear distinguishing marks on their cloths. Such orders were issued from time to time which indicates that these restrictions were not permanently enforced. However the Jewish clans who supported the Ismaili movement were gravely punished and massacres took place in the Zagros and Luristan regions.

The Mongol dynasties were a lot more tolerant to the religious minorities. Under the Mongol leader, Hulagu (1258 AD), the concept of the dhimmi and the division between "believers" and "non believers" were abolished. Once again non-Muslims were employed in the government institutions. For the first time a substantial Judeo-Persian literature emerges and jizya ceased to exist for a while. It was restored and quickly abolished by Ghazan and reintroduced by Oljeitu and this time for good. The Mongol Emperor Arghun appointed Jewish physician Sa'd al-Daula of Abhar as his Prime Minister. The act alienated the Muslim population and created resentment. The Minister was executed in 1291 and the Jewish quarters were savagely ransacked in Tabriz and Baghdad. Rahid al-Din Fazhl Allah Hamadani was another famous physician and historian from Jewish background who served the Il-Khan Oljeitu. He is known as the greatest Minster of this dynasty and wrote the famous history of the Mongols from the beginning to the time of Ghazan Khan. He was also put to death in 1318.

His famous library of 60,000 books was ransacked and the suburban area in Tabriz, Rub-i Rashidi build by him was looted. His severed head was taken to Tabriz and carried out about the town with cries of; "this is the head of the Jew who abused the name of God; may God's curse be upon him". In 1399 his remains were exhumed and reburied in a Jewish cemetery. Rashid al-Din is credited with a major administrative and tax reform while serving as a Minister and is known as the most important historian of his time.