An unimportant circumstance revealed the moral corruption of the Jewish Babylonian chiefs. There was a lawsuit about a large inheritance, which had not been conscientiously decided by the Exilarch David. His decision was influenced by the prospect of great gain. To make his decree legal and unimpeachable, David demanded the signatures of the two Geonim to the document prepared by him. Kohen-Zedek signed without objection; Saadiah, however, would not countenance the injustice. On being pressed by the parties, he gave the reason for his refusal. The Exilarch David, who now was doubly interested in obtaining his signature, sent his son Judah to ask him to sign the document without delay. Saadiah calmly replied that the Law forbade him to do such things, as it is said, "Ye shall not respect persons in judgment." Once more David sent his son to Saadiah to threaten him with deposition in case he still refused. Judah at first assumed a quiet demeanor, and begged Saadiah not to be the cause of quarrels in the community. When, however, he found him determined, he raised his hand against Saadiah, and vehemently demanded his signature. Saadiah's servants soon removed Judah, and locked the door of the meeting hall. David ben Zaccaï, who felt himself insulted, deprived the Gaon of his office. He excommunicated him and appointed a young man, Joseph ben Jacob ben Satia, as his successor. Saadiah, however, was not the man to be terrified by force. He, in turn, declared David to be no longer Exilarch, and named Josiah Hassan as Prince of the Captivity (930). Two factions immediately arose in Babylonia, the one for Saadiah, the other for David. On Saadiah's side were ranged the members of the academy of Sora and many respected and learned men of Bagdad, amongst whom were the sons of Netira. Opposed to him were Aaron Ibn-Sarjadu and his party, and probably also Kohen-Zedek and the members of the college of Pumbeditha. Both parties appealed to the Caliph Al-Muktadir, and bribed his favorites and courtiers to gain him over to their side. Ibn-Sarjadu spent 10,000 ducats to effect Saadiah's deposition. The Caliph wished to hear both parties, and ordered a formal trial to take place in Bagdad under the presidency of the vizir, who was assisted by many important men. The dispute was not settled. This was probably owing to the fact that the Caliph Al-Muktadir was constantly changing his vizirs during the last two years of his reign, and to the disturbed state of the capital during this time (930–932). Saadiah asserted his authority as Gaon, though there was a rival Gaon in the person of Joseph ben Satia. There were likewise rival Exilarchs, David and his brother Josiah Hassan.

It was only when Al-Muktadir was killed in a rebellion (October, 932), and Kahir, who was so poor that he was obliged to borrow clothes for the ceremony of installation, became Caliph, that David's party, which could pour more money into the empty treasury, gained the victory. In order to bring about the downfall of his opponent, the Exilarch squandered the money that had been extorted from the various communities. Saadiah was soon forbidden by the Caliph to continue in office, perhaps also to stay in Sora (commencement of 933). The rival Exilarch Hassan was banished to Khorasan, where he died. Saadiah now lived in retirement in Bagdad for four years (933–937). His health had suffered severely through the constant quarrels and the annoyance he had received, and he became melancholy. But this did not interfere with his intellectual activity. It was during his retirement that his best works, bearing the stamp of freshness and originality, were written.

He wrote Talmudic treatises, composed poetical pieces and prayers in prose, full of religious fervor. He also arranged a prayer book (Siddur), after the manner of Amram, collected the rules of the calendar (Ibbur), wrote a polemic against the Massoret, Aaron ben Asher, of Tiberias, and was in general particularly prolific in literary composition during this period. The greatest of his works, however, are his two philosophical writings, the one a commentary on the "Book of the Creation" (Sefer Yezirah), the other his magnum opus on Faith and Creed. Both these works are in Arabic. Saadiah was the first to set up a tolerably complete system of religious philosophy. The Karaite teachers, it is true, were fond of lengthy philosophical disputations, which they frequently introduced on most unsuitable occasions, but they were never able to develop a complete and perfect religious system, and the Arabs, too, had as yet no systematic philosophy. Saadiah, by his own unaided intellectual power, built up a Jewish philosophy of religion, although he borrowed his method of treatment and his philosophical themes from the Arabic Mutazilist school. His composition on the Ten Commandments, in which he strove to bring them into relation with the Ten Categories of the Aristotelian philosophy, belongs to his earlier and less excellent efforts.

He wrote his work on the philosophy of religion, Emunoth we-Deoth, in 934. Its object was to oppose and correct the erroneous views of his contemporaries as to the meaning of Judaism; on the one hand were the opinions of the unbelievers, who degraded it; and on the other, those of the ignorant people, who condemned all speculating on religious subjects as involving a denial of God. "My heart is sad," he writes in the introduction, "by reason of my people, who have an impure belief and a confused idea of their religion. Some deny the truth, clear as daylight though it be, and boast of their unbelief. Others are sunk in the sea of doubt, and the waves of error close over their heads, and there is no swimmer strong enough to stem the tide and rescue them. As God has given me the capacity of being useful to them, I consider it my duty to lead them to the right path. Should any one object and ask, 'How can we attain a true belief through philosophic thought, when many consider this as heresy and unbelief?' I would reply, 'Only the stupid do so, such as believe that every one who goes to India will become rich, or that the eclipse of the moon is caused by a dragon's swallowing the disc of the moon, and similar things.' Such people need not trouble us. Suppose, however, that one were to quote the warning of the Talmud against philosophical speculation, 'If any one searches into the mystery of eternity and space, such a person does not deserve to live,' we should reply that the Talmud could not have discouraged right thinking, since Scripture encourages us to it. The warning of the sages was intended to keep us only from that one-sided speculation which does not take into account the truth of Scripture. Limitless speculation can give rise only to error, and should it even eventually lead to truth, it has no firm foundation, because it rejects revelation, and puts doubt into its place. But when philosophy works hand in hand with faith, it cannot mislead us. It confirms revelation, and is in a position to refute the objections that are made by unbelievers. The truth of revealed Judaism may be premised, since it was confirmed through visible signs and miracles. Should, however, some one object that if speculation arrives at the same conviction as revelation, the latter is superfluous, since human reason could arrive at the truth without divine interposition, I should reply that revelation is necessary, inasmuch as, without it, men would have to go a long way round to reach clearness through their own thought. A thousand accidents and doubts might hinder their progress. God, therefore, sent His messengers to us in order to save us all this trouble. We thus have a knowledge of Him direct, confirmed by miracles."

Unbelief had already made such progress in the Eastern Caliphate, in consequence of the teachings of the Mutazilist school of philosophy, that an Arabic poet, Abul-Ala, a contemporary of Saadiah, who had rebuked the weaknesses of his time, said, "Moslems, Jews, Christians and Magi are steeped in error and superstition. The world is divided into two classes, those that have intelligence but no belief, and those that believe but have no understanding." In Jewish circles, many began to criticise the responses of the Geonim, and no longer looked upon them as oracular utterances. This criticism was not restricted to the decisions of the Geonim or the Talmud, but went so far as to doubt the trustworthiness of the Bible, and the very fact of revelation.

The unbelief of this time was best illustrated by the Rabbanite Chivi Albalchi, from the town of Balch in ancient Bactria. Chivi wrote a work against the Bible and revelation, in which he propounded two hundred objections against them. Some of these objections are of the same kind as those used even now by opponents of the Bible. Chivi was the first thoroughly consistent, rationalistic critic of the Bible. He had followers in his time; and teachers of the young spread his heretical views in the schools. In combating Chivi's unorthodox opinions, the two opponents, Saadiah and Solomon ben Yerucham, met on common ground. Saadiah, whilst yet in Egypt, had written a book in refutation of Chivi's doctrines. In his philosophy of religion he especially kept in view this tendency, hostile to revelation, and sought to expose its weakness. He likewise did not lose sight of the objections made against Judaism by Christianity and Islam.

Whilst Saadiah was developing thoughts for the elevation of future generations, he was still under the ban of excommunication. He had, therefore, no sphere of action but that of an author. But circumstances had changed meanwhile. The just Caliph Abradhi was now on the throne, in the place of the cruel and avaricious Kahir, who had decreed Saadiah's deposition. His vizir Ali Ibn-Isa was favorably inclined towards Saadiah. The Gaon Kohen-Zedek, who had made common cause with the Exilarch, had died in 936. His successor, Zemach ben Kafnaï, was a harmless man. So David had only Aaron Ibn-Sarjadu to assist him in his quarrel; the people, however, in increasing numbers, sided with Saadiah. It happened that an important lawsuit had to be decided; one party proposed the banished and deposed Gaon as judge, whilst the opposite party proposed the Exilarch. David, in his rage, had personal violence done to the man that had appealed to Saadiah. This act of violence caused the more ill-feeling, as the person so maltreated was not under the jurisdiction of the Exilarch, and had a perfect right to choose his judge without interference from the Exilarch.

Respected members of the community now took counsel as to the best means of putting an end to the contention between the Prince of the Exile and the Gaon. The peacemakers met at the house of an influential man in Bagdad, Kasser ben Aaron, the father-in-law of Ibn-Sarjadu, and impressed upon him the fact that the quarrel had already exceeded all bounds, that the community had been split into two camps, and that these things had been followed by the saddest consequences. Kasser assured them of his co-operation in restoring peace, and succeeded in overcoming the hostility of his son-in-law towards Saadiah. The peacemakers thereupon went to David, and argued with him till he yielded. When Kasser was sure that the Exilarch was inclined to reconciliation, he hastened to inform Saadiah of it. The whole community of Bagdad joined in the rejoicing. Some accompanied David, others Saadiah, until they met. The enemies embraced each other, and henceforward were the firmest of friends. The reconciliation was so complete that Saadiah accepted David's hospitality for several days. The latter restored him to his office, with many marks of honor.

The academy of Sora regained some of its former glory through Saadiah, and threw its sister academy into the shade. In the latter, two men, otherwise unknown, successively filled the post of Gaon. The questions from home and foreign communities were again sent to Sora, and Saadiah answered them without delay, although his health was severely impaired, and he was suffering from incurable melancholy. The responses which have been preserved are numerous; they were probably composed in the last year of his Gaonate. Many of them are in Hebrew, though most of them are in Arabic. His magnanimity was displayed in his conduct toward the family of his opponent, David. When the latter died, in 940, his son Judah, through Saadiah's influence, was elected in his stead, though he filled the post for only seven months, leaving a son twelve years old, whom Saadiah appointed his successor. He received the grandson of his former enemy into his house, and adopted him. Meanwhile a distant relative, a member of the Bene-Haiman family, from Nisibis, was to fill the office. He had scarcely been appointed before he had a quarrel with a Moslem. Witnesses testified that he had spoken disparagingly of Mahomet. For this offense he was put to death. When the last representative of the house of the Exilarch, who had been brought up by Saadiah, was raised to the princedom, Moslem fanaticism raged also against him. It was determined to assassinate him whilst he was riding in his state carriage, because the mere shadow of princely power among the Jews was disliked. The Caliph tried to prevent his murder, but in vain. Thus died the last of the Exilarchs, and the representatives of Judaism, in order to allay this fanatical hatred, determined to leave the office vacant.

Thus, after an existence of seven centuries, ended the Exilarchate, which had been the sign of political independence for Judaism. Just as the dignity of the Patriarchate had ceased in Judæa through the intolerance of the Christian emperors, so the Exilarchate now ceased through the fanaticism of the Mahometans. The two schools alone remained to represent the unity of the Jews, but even these were soon to vanish. With Saadiah's death (942), darkness settled upon the academy of Sora. It is true that he left a son, Dossa, who was learned both in the Talmud and in philosophy—the author of several works—but he was not appointed his father's successor. Joseph ben Satia, who had been deposed, was again made the chief of the school. He, however, was not able to maintain its superiority over the sister academy, which having at its head Aaron Ibn Sarjadu, the former opponent of Saadiah, again rose to importance.