In January 1953, Mosaddegh successfully pressed Parliament to extend his emergency powers for another 12 months. With these powers, he decreed a land reform law that established village councils and increased the peasants' share of production. This weakened the landed aristocracy, abolishing Iran's centuries-old feudal agriculture sector, replacing it with a system of collective farming and government land ownership, which centralized power in his government. Mosaddegh saw these reforms as a means of checking the power of the Tudeh Party, which had been agitating for general land reform among the peasants.
In March 1953, Secretary of State John Foster Dulles directed the Central Intelligence Agency (CIA), which was headed by his younger brother Allen Dulles, to draft plans to overthrow Mossadegh. On 4 April 1953, Allen Dulles approved $1 million to be used "in any way that would bring about the fall of Mosaddegh". Soon the CIA's Tehran station started to launch a propaganda campaign against Mossadegh. Finally, according to The New York Times, in early June, American and British intelligence officials met again, this time in Beirut, and put the finishing touches on the strategy. Soon afterward, according to his later published accounts, the chief of the CIA's Near East and Africa division, Kermit Roosevelt, Jr. the grandson of U.S. President Theodore Roosevelt, arrived in Tehran to direct it. In 2000, The New York Times made partial publication of a leaked CIA document titled Clandestine Service History – Overthrow of Premier Mosaddegh of Iran – November 1952 – August 1953.
In August 1953, the Shah finally agreed to Mossadegh's overthrow, after Roosevelt said that the United States would proceed with or without him, and formally dismissed the prime minister in a written decree, an act that had been made part of the constitution during the Constitution Assembly of 1949, convened under martial law, at which time the power of the monarchy was increased in various ways by the Shah himself. As a precautionary measure, he flew to Baghdad and from there hid safely in Rome. He actually signed two decrees, one dismissing Mosaddegh and the other nominating the CIA's choice, General Fazlollah Zahedi, as Prime Minister. These decrees, called Farmāns, were specifically written as dictated by Donald Wilber, the CIA architect of the plan, and were designed as a major part of Wilber's strategy to give legitimacy to the coup, as can be read in the declassified plan itself, which bears his name.
Soon, massive popular protests, aided by Roosevelt's team, took place across the city and elsewhere with tribesmen at the ready to assist the coup. Anti- and pro-monarchy protesters, both paid by Roosevelt, violently clashed in the streets, looting and burning mosques and newspapers, leaving almost 300 dead. The pro-monarchy leadership, chosen, hidden and finally unleashed at the right moment by the CIA team, led by retired army General and former Minister of Interior in Mosaddegh's cabinet, Fazlollah Zahedi joined with underground figures such as the Rashidian brothers and local strongman Shaban Jafari, to gain the upper hand on 19 August 1953 (28 Mordad). The military joined on cue: pro-Shah tank regiments stormed the capital and bombarded the prime minister's official residence, on Roosevelt's cue, according to his book. Mosaddegh managed to flee from the mob that set in to ransack his house, and, the following day, surrendered to General Zahedi, who was meanwhile set up by the CIA with makeshift headquarters at the Officers' Club. Mosaddegh was arrested at the Officers' Club and transferred to a military jail shortly after. On 22 August, the Shah returned from Rome.
On 21 December 1953, Mossadegh was sentenced to three years' solitary confinement in a military prison, well short of the death sentence requested by prosecutors. After hearing the sentence, Mossadegh was reported to have said with a calm voice of sarcasm: "The verdict of this court has increased my historical glories. I am extremely grateful you convicted me. Truly tonight the Iranian nation understood the meaning of constitutionalism."