Military leaders and senior tsarist officials agreed before the war that Russia was a much stronger nation and had little to fear from the Empire of Japan. The fanatical zeal of the Japanese infantrymen astonished the Russians, who were dismayed by the apathy, backwardness, and defeatism of their own soldiers. The defeats of the Army and Navy shook Russian confidence. The population was against escalation of the war. The empire was certainly capable of sending more troops but this would make little difference in the outcome due to the poor state of the economy, the embarrassing defeats of the Russian Army and Navy by the Japanese, and the relative unimportance to Russia of the disputed land made the war extremely unpopular. Tsar Nicholas II elected to negotiate peace so he could concentrate on internal matters after the disaster of Bloody Sunday on 9 January 1905.

Both sides accepted the offer of United States to mediate. Meetings were held in Portsmouth, New Hampshire, with Sergei Witte leading the Russian delegation and Baron Komura leading the Japanese delegation. The Treaty of Portsmouth was signed on 5 September 1905 at the Portsmouth Naval Shipyard.

After courting the Japanese, the US decided to support the Tsar's refusal to pay indemnities, a move that policymakers in Tokyo interpreted as signifying that the United States had more than a passing interest in Asian affairs. Russia recognized Korea as part of the Japanese sphere of influence and agreed to evacuate Manchuria. Japan would annex Korea in 1910 (Japan–Korea Treaty of 1910), with scant protest from other powers. From 1910 forward, the Japanese adopted a strategy of using the Korean Peninsula as a gateway to the Asian continent and making Korea's economy subordinate to Japanese economic interests. The United States was widely blamed in Japan for the Treaty of Portsmouth having allegedly "cheated" Japan out of its rightful claims at the peace conference.