When he arrived in Constantinople together with his aunt Gracia Mendes Nasi, Nasi made a fortunate decision in supporting the future sultan Selim II, against his rival Bayezid; as a result, he was favored by the Seraglio, and eventually became a high ranking diplomat and minister. Due to his trading connections in Europe, he was able to exercise great influence on Ottoman foreign policy. Among his achievements were negotiating peace with Poland and influencing the new election of the Polish king. He was awarded the monopoly of the beeswax trade with Poland, and of the wine trade with Moldavia, and maneuvered in the latter country to keep princes favorable to his policies in power. In 1561, Nasi backed Ioan Iacob Heraclid to rule as despot, supported Alexandru Lăpuşneanu's return to the throne in place of Ştefan Tomşa, and ultimately endorsed Ion Vodă cel Cumplit ; he was himself considered a suitable choice for hospodar of either Moldavia or Wallachia in 1571, but Selim II rejected the proposal. During the war between the Ottomans and the Republic of Venice, Nasi's negotiations with the Jewish community in Venetian-ruled Cyprus were uncovered, and, as a result, the Jewish population of Famagusta was expelled in June, 1568. It is believed that he intended parts of Cyprus to be a Jewish colony and encouraged the Ottoman annexation of Cyprus in the war to that end; he was granted a coat of arms by Selim that indicated he would be given viceregal rank in that colony. Nasi's relative Abraham Benveniste was arrested in 1570, on charges of having set fire to the Venetian Arsenal on Nasi's instigation. Maintaining contacts with William the Silent, Nasi encouraged the Netherlands to revolt against Spain, a major adversary of the Ottoman Empire. For this and other achievements, he was appointed by Selim to become the Duke of Naxos. Represented locally by one Francesco Coronello, Nasi mainly ruled the Duchy from his palace of Belvedere, where he also maintained his own Hebrewprinting press, which was kept by his wife, Doña Reyna, after Joseph's death.
Nasi is best known for his attempt to resettle the towns of Tiberias and Safed in 1561. He was the first person to attempt to settle Jews in the cities of what was then Southern Syria by practical means, as opposed to waiting for the Messiah. Nasi secured a grant giving ruling authority from the Sultan, and, with the assistance of Joseph ben Adruth, rebuilt the walls and the town. He also attempted to turn it into a textile center by planting mulberry trees and encouraging craftsmen to move there. Arrangements were made for Jews to move from the Papal States, but, when the Ottomans and the Republic of Venice went to war, the plan was abandoned.