The decline of Assyria allowed another group of people, the Chaldeans, to create a new dynasty of kings and a somewhat smaller empire centered at Babylon. The Chaldeans were peoples that settled in southern Mesopotamia, where they established their rule, later extending it farther north. They grew strong enough to overthrow Assyrian rule in 626 B.C.E. with the help of another new people, the Medes, who had established themselves in modern western Iran. The Neo- (or new) Babylonian empire they created was marked by an attempt at the restoration of past Babylonian greatness. Their most famous king, Nebuchadnezzar II (neh-buh-kuhd-NEH-zuhr) (r. 604–562 B.C.E.), thrust Babylonian power into Syria and Judah, destroying Jerusalem and forcibly deporting the residents to Babylonia.

The Chaldeans focused on solidifying their power and legitimizing their authority. Kings and priests consciously looked back to the great days of Hammurabi and other earlier kings. They instituted a religious revival that included restoring old temples and sanctuaries, as well as creating new ones in the same tradition. Part of their effort was commercial: they sought to revive the economy in order to resurrect the image of Babylonian greatness. In their hands, the city of Babylon grew and gained a reputation for magnificence and luxury.

The Neo-Babylonians preserved many basic aspects of older Babylonian law, literature, and government, yet they failed to bring peace and prosperity to Mesopotamia. Loss of important trade routes to the north and northeast reduced income, and additional misfortune came in the form of famine and plague. The Neo-Babylonian kingdom was weakened and ultimately conquered in 539 B.C.E.by their former allies, the Medes, who had themselves found new allies, the Persians.