A major revolt, led by Shova Singh and Rahim Khan, shook Mughal administration in Bengal in 1696-98. The rebels almost obliterated the Burdwan raj family and they overran most of western Bengal. The uprising broke a prolonged period of relative peace and growing prosperity in the province, fueled by the trading activities of local entrepreneurs and northern European trading companies. The inability of imperial officers to suppress the revolt quickly revealed serious weaknesses in both local administration and the empire's superstructure. Discipline among imperial officers was weakening as Aurangzib's campaign in the Deccan proceeded inconclusively, as the emoluments in the form of jagir assignments no longer provided expected incomes, as nobles began to anticipate a succession struggle following Aurangzib's death, and as some officials in Bengal neglected administrative duties in favor of trading opportunities.

The 1696-98 revolt led to the appointment of Murshid Quli Khan as the province's diwan. Murshid Quli's regime in Bengal, coupled with Aurangzib's death and the attenuation of Delhi's authority, produced a lowering of the center of gravity in Mughal India's decision-making processes, a localization of power, and the emergence of a regional dynasty. Not only did Bengal become virtually independent in the following decades, much of the authority once commanded by temporary mansabdars appointed from Delhi now devolved upon hereditary and newly enlarged zamindars. Murshid Quli Khan relied on fewer but expanded zamindaris to collect the state's revenue.