During the late 1550s, Ivan developed a hostility toward his advisers, the government, and the boyars. Historians have not determined whether policy differences, personal animosities, or mental imbalance caused his wrath. In 1565 he divided Russia into two parts: his private domain (or oprichnina) and the public realm (or zemshchina). For his private domain, Ivan chose some of the most prosperous and important districts of Russia. In these areas, Ivan's agents attacked boyars, merchants, and even common people, summarily executing some and confiscating land and possessions. Thus began a decade of terror in Russia that culminated in the Massacre of Novgorod (1570).

As a result of the policies of the oprichnina, Ivan broke the economic and political power of the leading boyar families, thereby destroying precisely those persons who had built up Russia and were the most capable of administering it. Trade diminished, and peasants, faced with mounting taxes and threats of violence, began to leave Russia. Efforts to curtail the mobility of the peasants by tying them to their land brought Russia closer to legal serfdom. In 1572 Ivan finally abandoned the practices of the oprichnina.

According to a popular theory,[petikan diperlukan][oleh siapa?] the oprichnina was started by Ivan in order to mobilize resources for the wars and to quell opposition. Regardless of the reason, Ivan's domestic and foreign policies had a devastating effect on Russia and led to a period of social struggle and civil war, the Time of Troubles (Smutnoye vremya, 1598-1613).