The concessions accorded in Russia to the Jewish traders from Bukhara helped to disseminate the notion that the situation of the Jews in the Russian Empire was good, and when Russia conquered Central Asia in 1864–88 the Jews welcomed the Russians and even aided them, for example in the conquest of Samarkand (1868). According to the 1868 peace treaty, Bukhara, which had been decisively defeated, became a vassal of Russia and other parts of its territories, including Samarkand and several other towns with a Jewish population, were incorporated into the region (kray) of Turkistan, which was annexed directly to the Russian Empire. In the first few years, the Russians took several measures to gain the allegiance of Central Asian Jewry, which they regarded as the only loyal element within the native population.

The regime did not restrict Jewish autonomy, and only added to the communal structure the office of official rabbi (kazyonny ravvin), whose functions were similar to those of the official rabbis in other areas of the Russian Empire. The Russian-Bukharan peace treaty included three paragraphs that defined the rights of the Jews of Bukhara to live freely in Russia, to trade freely there, and to purchase real estate within its borders. In 1866 and 1872 it was decreed that the Jews of Bukhara and two other states in Central Asia, Khiva and Khuqand, or, in the Russian pronunciation Kokand (in the former, which became a Russian vassal in 1873, there were, in effect, no Jews, while the latter was abolished in 1876 and its territory annexed directly to Russia) would be granted Russian citizenship even if they resided in these countries, on condition that they join the trade guilds in Russia (thus exempting them from the law that denied Russian citizenship to "alien" Jews).

This policy aided Bukharan Jewry in acquiring a powerful status in trade relations, both with Central Asia and in trade with central Russia. Bukharan Jews established trading companies which opened branches in the large Russian cities as well as factories for the initial processing of local products, especially cotton and silk (the most known of them—the Va'adiyayev, the Potilahov and the Dividov companies). The local Jewish trader and industrialist, familiar with local conditions, had the advantage in competition with his Russian counterpart who was new to the area.

At the same time the Emir of Bukhara and his government attempted to make of the Jews that remained within the borders of the kingdom scapegoats for their defeat, persecuting them and extorting money from them. These decrees resulted in the mass emigration of Jews from Bukhara to Turkistan. The Jewish population increased greatly in Samarkand, Tashkent and other cities. Fierce competition between the local Jewish tradesmen and industrialists and their Russian rivals and the movement of Jews from Bukhara to Turkistan were the main causes for the imposition of discriminatory measures against the Jews of Central Asia as early as the 1880s. In secret government circulars these measures were explained unequivocably as necessary to protect the Russian traders and industrialists and to limit the number of "native" Jews in the Turkistan region.

In the year when the Russian conquest of Central Asia was completed (1888), the Russian authorities decreed the expulsion of the Jews from all the towns of the Trans-Caspian kray, which covered approximately the territory of the present-day Turkman Soviet Republic. However, implementation was postponed indefinitely for fear of damaging the interests of the Russian traders engaged in trade with the local Jews. At the same time a decree was issued (but in a short period of time suspended) closing the synagogues in Merv. In 1887–89 new regulations were issued that divided the Bukharan Jews who lived in the Turkistan kray, into two categories: "native Jews of the Turkistan kray", i.e., the Jews who had lived in what was now the kray before the conquest and their direct descendants, and those who could not prove that they or their ancestors were natives of the kray.

The former were granted equal rights with the local Muslims, while the latter (as well as the Jews from Iran and Afghanistan who were in Turkistan) were regarded from a legal standpoint as foreign citizens. Their rights were restricted and it was stipulated that by 1905 they were "to return to their place of residence," i.e., within the borders of the Bukharan khanate. From 1900 on they were permitted to reside only in three border settlements—Osh, Katta-Qurghan and Petro-Alexandrovsk (now T[rtkEl)—three townlets which were not industrially developed and located away from the trade routes.

The possibility of obtaining Russian citizenship, accorded in regulations between 1866 and and 1872, remained merely theoretical and its realization became very difficult. In 1892 the general governor of the Turkistan region issued a secret circular severely restricting the entry into the region of Jews residing within the boundaries of Bukhara. Czar Nicholas II himself added a note to the protocol of the government session held on November 20, 1898, defining the policy of the regime in Central Asia towards the Jews as follows:

To protect the General Governorship (region) of Turkistan and the General Governorship of the Steppes (i.e., the Kazak and Kirgiz areas conquered by Russia in the second half of the 19th century) from the harmful activities of the Jews, so long as this is possible.

However, already in 1900 it was evident that it would not be possible to implement the proscription. The authorities were confronted by the mutual responsibility of the members of the community, who protected the "aliens" in their midst and covered up for them, thus preventing the attempt to banish individuals, and even groups of Jews. The Jews were also aided by the lack of organization and the confusion in the Russian administration of the region. Moreover, the lower echelons of officialdom, whose task it was to carry out these orders, often accepted bribes and ignored the presence of the "aliens." Implementation of the decree was thus postponed first till 1909 and then till 1910, and in the meantime, the chief rabbi of Turkistan, R. Salomon Tajer, intervened in this matter.

He appealed to the government, using the assistance of advocates who were well-versed in the law and wealthy Bukharan traders, and thus the town Khuqand, Marghelan, and Samarkand were added to the list of places where residence was permitted. In 1910 the committee of Count Pahlen, entrusted with the task of examining the situation in the Turkistan region, recommended that additional decrees be issued against the Jews residing there. One of the high officials of the local regime announced publicly in that same year that the Jews are "robbers of the people" and "counterfeiters of documents."

He ended his statement thus: "It is to be expected that the people itself will issue a sentence against the Jews." This was an open call to the masses to terrorize the Jews. Indeed, already in January 1911 a memorandum to the authorities by a high official reported that "the local population [i.e., the Muslims] demands that all the Jews be banished," and that it "requests permission to massacre them." During these years the press and literature of local Muslim modernists (jadids) displayed hostility towards the Jew (and the Armenian), the "robber", and usually depict an image of a Jewish tradesman "robbing" the local Muslim tradesmen of their profits, since the latter do not know how to compete with him.

With the outbreak of World War I, there was a violent upheaval within the Muslim population of Central Asia, that in 1916 became an open revolt which the Czarist army managed to subdue only with great difficulty. The Jewish problem thus lost some of its urgency. But even during the course of World War I, as is attested in secret documents of the period, the rulers continued to formulate decrees directed against the Jews.

The Russian conquest aided in the establishment of a stratum of tradesmen and industrialists within Bukharan Jewry that was limited in number but had significant economic power and ability to compete. Nevertheless, the new conditions brought about the impoverishment of the masses of Bukharan Jewry since the importation of the cotton and silk cloths that were produced in Russian industrial enterprises resulted in the elimination of the major occupation of the Jews of Bukhara—the dyeing of cloths. The impoverished craftsmen turned to other professions. Thus, by the end of the 19th and the beginning of the 20th century, hairdressing and shoe-shining and repairing became the almost exclusive monopoly of the Jews in Central Asia; many of them also became petty traders.

The advent of the Russian regime brought changes also in the field of education. Alongside the khomlo (heder), schools were established that taught some basic principles of secular culture. The teachers were mostly Bukharan Jews who had been educated in Jerusalem, where a Bukharan community had been established. In addition secular schools supported by the regime were established "Russian—native Jewish schools," in which the language of instruction was Russian. The first periodical in the language of the Bukharan Jews, entitled Rahamim, began to appear in 1910 in the town of Skobelev (now Ferghana) and continued to be published until 1916.