The founder of the Safavid Empire, Shah Ismail, had utilized the Qizilbash (Turkic tribes) to start his empire; and when Abbas came to power, they continued to hold significant influence and power at the expense of the shah. To reduce their power, Abbas implemented the Ghulam (slave-soldier) System. Like the Ottoman Janissaries, the ghilman (plural of ghulam) were captured from conquered regions, usually the Caucasus (around the Black and Caspian Seas). These Georgians, Circassians, and Armenians were converted to Islam, and trained in the army, royal household or the civil administration with exclusive loyalty to the shah. Abbas soon had an army of 40,000 ghilman, breaking the Qizilbash monopoly of military power. Abbas also replaced many provincial Qizilbash governors by ghilman, which also improved revenue. Government officials sent taxes directly to the royal treasury. Finally, he used a network of spies to prevent dissent or rebellion; and he could be quite ruthless in eliminating enemies. He even executed or blinded several of his sons to prevent them from challenging his authority, a move that ultimately weakened the succession after his death.

Abbas also recognized the need to reform his military, introducing the latest gunpowder weapons and hiring European military advisors (including English diplomats in search of an ally against the Ottomans). Abbas' new army included musketeers, cavalry, and artillery corps. Abbas then launched successful campaigns to reclaim lost territories and expand the Safavid Empire, recapturing the strategic city of Tabriz and the Caucasus region from the Ottoman Empire, defeating the Uzbeks in the northeast, and even capturing Hormuz from the Portuguese in 1622, securing control over vital Persian Gulf trade routes.

The Safavid Empire controlled key routes of the Silk Roads, and Abbas actively promoted commerce and sought to make the Safavid Empire a key hub in global trade. He moved the capital to Isfahan, which became one of the most important cities in the world during his reign, attracting merchants from across Europe and Asia. He also encouraged the development of the silk industry, creating state monopolies and improving production to boost trade revenues and make Iran a major producer of silk for the global market. Abbas also brought 300 Chinese potters to Iran to boost the production of Chinese style ceramics.

His diplomatic contacts with Europe, especially with the British, also encouraged lucrative trade agreements with the Dutch and English East India Companies. The English East India Company even helped Abbas retake Hormuz from the Portuguese in 1622. Finally, Abbas invested heavily in infrastructure, including road networks, caravanserais, and bridges, to facilitate trade across the empire. This helped boost the economy and enhanced the centralization of the state by improving communication and transportation.

In 1598, Abbas established Isfahan as the new capital, transforming it into one of the world’s most beautiful and cosmopolitan cities. Abbas invested in mosques, baths, colleges, and caravanserais to make Isfahan one of the most beautiful cities in the world and a center of Persian culture. He established painting schools and studios, and  carpet weaving became an important part of Persian industry and culture, as wealthy Europeans started importing Persian rugs. He also forcibly relocated Armenian populations to Isfahan, granting them religious freedom and encouraging them to continue their silk trade that dated back to the Byzantine Empire. 

While promoting Shia Islam, Shah Abbas also took steps to limit the power of the ulema (religious scholars) who might challenge his rule, integrating many religious leaders into the state bureaucracy. Abbas was generally tolerant toward Christianity; although he massacred and deported hundreds of thousands of Georgian Christians who rebelled against his rule.