Though Mustafa and his able grand vizier, Ragib Mehmed Pasha, understood the necessity for reform, their efforts were directed toward the results, not the causes, of the Ottoman decline. They were unable to curb tax abuses; hence, their fiscal reforms proved ineffective. Administrative reforms foundered on the central government's inability to extend its authority over the local rulers (aʿyān) of its provinces in Europe and Asia. Assisted by Baron François de Tott, a French artillery officer, they were more successful in their military reforms: the artillery corps was reorganized, an engineering school closed by the Janissaries (Janissary) in 1747 was reopened, and a school of mathematics for the navy was founded (1773).

In his foreign policy, Mustafa was determined to maintain the peace established by the Treaty of Belgrade (Belgrade, Treaty of) (1739). In spite of urgings by the French and by Frederick the Great of Prussia, the Ottomans were reluctant to join the European scheme of alliances and counteralliances. Later, however, Russian ambitions in Poland and in the Crimea compelled Mustafa to declare war on Russia (Russo-Turkish wars) (1768). Following a few initial unimportant successes, the Ottomans suffered a series of defeats on the Danube and in the Crimea that culminated in the destruction of the Ottoman fleet at the Battle of Çeşme (Çeşme, Battle of) (1770) in the Aegean.

A poet and a scholar, Mustafa, during his years of seclusion before his accession, had studied astrology, literature, and medicine. As a sultan who failed to revive the empire, he placed his sole hope with his son Selim (later Selim III), whom he educated with utmost care but who did not become sultan until 1789.