Abstract The prophet Zoroaster founded the first monotheistic religion in history, which once rose to great imperial status and still survives unchanged today despite centuries of Muslim pressure. Unlike the founders of other monotheistic religions after him, he achieved this not through the overthrow of the original Iranian polytheism but through its deep reform—a strategy that made acceptance easier and ensured a continuing role for the priests. Monotheistic reform is thus a third way out of ancient Indo-European polytheism, besides extinction in the Greco-Roman case and mutation into sectarian theism in the Indian case. This paper surveys the Iranian story and offers two economic models to account for the two key factors that made the transition to monotheism possible: the theological structure and the role of the priesthood. Unlike the founders of other monotheistic religions after him, he achieved this not through the overthrow of the original Iranian polytheism but through its deep reform—a strategy that made acceptance easier and ensured a continuing role for the priests. Monotheistic reform is thus a third way out of ancient Indo-European polytheism, besides extinction in the Greco-Roman case and mutation into sectarian theism in the Indian case. This paper surveys the Iranian story and offers two economic models to account for the two key factors that made the transition to monotheism possible: the theological structure and the role of the priesthood. Furthermore, unlike Jesus of Nazareth and many early Christians, Zoroaster was not martyred and martyrdom has no place in the religion’s tradition; and unlike Moses, other Jewish prophets, Jesus, many Christian saints and martyrs, and the prophet Muhammad, neither he nor his followers are reported as performing miracles (Woodward,  2000 ). Hence, two of the most powerful engines of historical conversion to monotheism (as modeled in Ferrero, 2014a , 2016 ) are missing in Zoroastrianism, which makes its success and persistence all the more remarkable. It will argue that two intertwined factors are key to this understanding: the theological structure and the role of the priests. In this, the paper follows in a line of research on the political economy of polytheism that began with Ferrero and Tridimas ( 2018 ) on ancient Greco-Roman religion, and Basuchoudhary et al. ( 2020 ) on Hinduism. Comparisons with these two polytheistic systems will help to put Zoroastrianism into analytical perspective. On the other hand, the paper contributes to the meager economic literature on the birth of monotheism, which includes Raskovich’s ( 1996 ) pioneering work on Judaism as well as Ferrero’s ( 2014a , 2014b ,  2016 ) on Christianity. The rest, written in a later form of the language known as Younger Avestan, appears to have been handed down in a more fluid oral tradition, with each successive generation of priests updating the language, making changes, and adding new material. Nevertheless, it contains some very ancient material. Precisely because some substantial part of the pagan beliefs, rituals and observances survived into Zoroastrianism, scholars can use parts of the Avesta to reconstruct ancient Iranian polytheism, with the help of comparisons with the earliest strata of the Vedic texts. The paper is organized as follows. Section  2 gives an outline of traditional Iranian polytheism and Sect. Thus the new theology was cast in the mold of the old cosmogony. Zoroaster’s theological reform did not stop at the reordering of the old pantheon. Opposite to, and coexisting with, Ahura Mazda he conceived a Hostile Spirit, Angra Mainyu, who was also uncreated and wholly malign. At their original encounter, these “two primal spirits, twins, renowned to be in conflict…. the good and the bad” (in the words of an ancient hymn; Boyce,  1979 , 20) made a deliberate choice, one choosing righteousness ( asha ) and the other falsehood ( drug ). This is the doctrine of dualism, which has often been thought to sit awkwardly with monotheism (as further discussed in the concluding section). Although one can see the doctrinal logic of this development—some harrowing deaths are involuntary, so it seems only fair to afford these people a chance of salvation; and then if the dead can be cleansed by proxy, why not the living also?—the whole idea of interceding for the dead seems alien to Zoroaster’s teaching of everyone’s personal responsibility for their own fate. It is, however, an element of continuity with the ancient Indo-Iranian tradition of caring for the souls of the departed, and it could therefore be seen as a tempering of the stern original doctrine to accommodate the new converts as the religion expanded. These “old members” surely drew benefits from such institutionalization of the cult—witness the fact that the fire temples became a fixture of Zoroastrian communities the world over, down to the tiny groups surviving today. 5 Discussion and Conclusion Two issues have long made it problematic to identify Zoroastrianism as The pagan origin of the yazatas is important because it must have made conversion relatively easy for the Iranian peoples, as it did not involve a complete turnaround of beliefs. Dualism is one way for a religion to address the problem of evil which is inherent in monotheism—how can a God who is thought to be all-powerful, all-knowing, and wholly good tolerate evil? So one could say that while God is not quite the One and Only so long as the present time of Mixture lasts, he will indeed “become” such at the End, as the final victory of the good over evil is not to be doubted; and with the disappearance of Angra Mainyu and his cohorts, dualism will leave the field to unqualified monotheism. Footnote 11 It began with the prophet called Second Isaiah during the Jews’ Babylonian exile in the 6th century BCE and continued through the following centuries via the sustained contact between Iranian and Jewish neighbors in the Near East.