Elections to the twenty-first Majlis in September 1963 led to the formation of a new political party, the Iran Novin (New Iran) Party, committed to a program of economic and administrative reform and renewal. The Alam government had opened talks with the National Front leaders earlier in the year, but no accommodation had been reached, and the talks had broken down over such issues as freedom of activity for the front. As a result, the front was not represented in the elections, which were limited to the officially sanctioned parties, and the only candidates on the slate were those presented by the Union of National Forces, an organization of senior civil servants and officials and of workers' and farmers' representatives, put together with government support. After the elections, the largest bloc in the new Majlis, with forty seats, was a group called the Progressive Center. The center, an exclusive club of senior civil servants, had been established by Hasan Ali Mansur in 1961 to study and make policy recommendations on major economic and social issues. In June 1963, the shah had designated the center as his personal research bureau. When the new Majlis convened in October, 100 more deputies joined the center, giving Mansur a majority. In December, Mansur converted the Progressive Center into a political party, the Iran Novin. In March 1964, Alam resigned and the shah appointed Mansur prime minister, at the head of an Iran Novin-led government.

The events leading to the establishment of the Iran Novin and the appointment of Mansur as prime minister represented a renewed attempt by the shah and his advisers to create a political organization that would be loyal to the crown, attract the support of the educated classes and the technocratic elite, and strengthen the administration and the economy. The Iran Novin drew its membership almost exclusively from a younger generation of senior civil servants, Western-educated technocrats, and business leaders. Initially, membership was limited to 500 hand-picked persons, and it was allowed to grow very slowly. In time it came to include leading members of the provincial elite and its bureaucratic, professional, and business classes. Even in the late 1960s and early 1970s, when trade unions and professional organizations affiliated themselves with the party, full membership was reserved for a limited group.

In carrying out economic and administrative reforms, Mansur created four new ministries and transferred the authority for drawing up the budget from the Ministry of Finance to the newly created Budget Bureau. The bureau was attached to the Plan Organization and was responsible directly to the prime minister. In subsequent years it introduced greater rationality in planning and budgeting. Mansur appointed younger technocrats to senior civil service posts, a policy continued by his successor. He also created the Health Corps, modeled after the Literacy Corps, to provide primary health care to rural areas.

In the Majlis the government enjoyed a comfortable majority, and the nominal opposition, the Mardom Party, generally voted with the government party. An exception, however, was the general response to the Status of Forces bill, a measure that granted diplomatic immunity to United States military personnel serving in Iran, and to their staffs and families. In effect, the bill would allow these Americans to be tied by United States rather than Iranian courts for crimes committed on Iranian soil. For Iranians the bill recalled the humiliating capitulatory concessions extracted from Iran by the imperial powers in the nineteenth century. Feeling against the bill was sufficiently strong that sixty-five deputies absented themselves from the legislature, and sixty-one opposed the bill when it was put to a vote in October 1964.