We have seen in chapter 27 that in the struggle between the "better" people and the "smaller" people was typical for the political life of Novgorod in the last years. This enmity often grew into open feuds, weakened the principality and made it an easy prey for the mighty neighbors — Muscovy and Lithuania. All knyazes of Muscovy attempted to bring Novgorod under their control and waged wars which ended usually with their victories and contributions payed by Novgorod. When Vasily the Dark defeated Shemyaka (see chapter 45), Shemyaka fled to Novgorod. Vasily seized the city and forced the Novgorodians to pledge obedience to Moscow. These attacks of the Moscow knyazes made Novgorod to seek protection from the Lithuanian knyazes. Lithuania, on the other hand, also did their best to subjugate Novgorod and to make them pay contributions and provided little assistance against Moscow. The Novgorodians came to the conclusion that their position between two strong enemies will not give them any chances to retain the independence and that only a permanent alliance with one of these neighbors might provide for the continuation of the Novgorod as a state. Two parties were formed in Novgorod: one of them proposed an agreement with Muscovy, the other one — with Lithuania. The former party included mostly the "smaller" people — peasants, workers, craftsmen and small merchants, while the latter party was supported by the aristocracy and rich merchants. For the "smaller" people an alliance with catholic Lithuania meant a betrayal of their religion. Boyars, led by the family of Borétskies, strived to keep the old state of Novgorod which Muscovy was to destroy. After Vasily the Dark captured Novgorod, the support of the pro-Lithuanian party grew. In 1471 Novgorod, led by the Borétskies, signed a treaty with the knyaz of Lithuania and the king of Poland Kazimierz, son of Jogaila. Kazimierz promised to protect Novgorod from Moscow, to appoint his deputy in Novgorod and to observe the liberties of the city.
When Moscow learned of the treaty, it was seen as a treason of the grand knyaz, the orthodox faith and the Russian people. Ivan III wrote a letter to Novgorod, asking them to reconsider their decision. When they refused to, he gathered a council of military, official and religious leaders of Rus, read them a list of the misdemeanours of Novgorod and asked the council whether he should start the war immediately or wait for the winter, when rivers and moors would freeze, to alleviate the military actions. The council decided not to wait. The campaign was organized as a religious war. The chronicles said that as Dimitri withstood godless Mamay, so knyaz Ivan went against these converts from the Orthodoxy to Catholicism. The Muscovite army under the commandment of knyaz Daniil Holmsky entered the Novgorod principality along some routes. One group defeated the Novgorod army on the banks of lake Ilmen. Another group crushed the main Novgorod forces on river Shélon. Boretsky was caught and executed. The road to Novgorod was opened and Lithuania did not help. The Novgorodians had to ask Ivan to forgive them. They promised to abandon the attempts to ally with Lithuania, to sign eternal union with Moscow and to pay a huge sum of 15½ thousand rubles. Ivan returned to Moscow and the old feuds resumed in Novgorod. The citizens of Novgorod began to send complaints to Ivan III to Moscow and in 1475 he returned to Novgorod to dispense justice. Since he had no reasons to assist the aristocrats, the Novgorodians began coming to Moscow every years to ask Ivan for justice. During one of these visits, two Novgorod officials addressed Ivan III as Gosudár, while earlier he was always titled Gospodín. The difference was huge. In the old Russian language, gosudar meant "master, owner". This word was used by servants to address their master. Gospodin, on the other hand, was just an honorary title given by free people to other free people. So, the Novgorodians called their own city "Gospodín Veliky Novgorod" (Lord Great Novgorod). Ivan III used this occasion to put an end to the liberties of Novgorod. His ambassadors came to Novgorodians and asked what did they want from Ivan III by calling him their gosudar. When the Novgorodians replied that nobody gave these officials the right to recognize Ivan as their master, Ivan accused them of lying and besieged the city. He demanded for obedience and proclaimed that the Novgorod state will be based on the same principles as Muscovy: there would be no more locally elected posadniks and no more veche. In January 1478 Novgorod had to agree to these terms. The bell that used to call the people to veche was taken to Moscow. The family of Boretskies and their head, widow of the posadnik Marfa Boretskaya (Martha the Mayoress, Marfa Posadnitsa), who was thought to be the leader of the anti-Moscow party, were also taken to Moscow. After the city all other Novgorod lands were also brought under the rule of Moscow. Of all these lands, only Vyatka dared to oppose Ivan III, but in 1489 the army led by knyaz Daniil Shchenyátya seized Vyatka.
In the first year after the subjugation of Novgorod, Ivan's rule was peaceful. However, a year later, when Novgorod attempted to return their independence, Ivan captured their archbishop Theophil (or Theophilos, Feofilos) and sent him to Moscow. Archbishop Sergius was put in his place. Many boyars were executed, even more were removed from Novgorod to the east, to the lands of Muscovy. Gradually, all the "better" people were removed from the city. Their lands were distributed between the servants of Ivan III settling in Novgorod lands. The life of the "smaller" people turned significantly better and they welcomed the changes brought by the knyaz of Moscow. They were organized into peasant communities typical for Muscovy. When Ivan III sent the German merchants away from Novgorod, the trade between Novgorod and Europe, which layed the foundation to the independence of Novgorod, dropped to zero. Pskov retained a certain degree of the independence for some more time, but demonstrated the obedience to Muscovy.