On 17 July, at Petrograd, the Bolsheviks issued a proclamation stating that the Coalition Government had collapsed and that power must now pass to the Soviets. Demonstrations and fighting in the streets of the capitol continued. Bolshevik Josef Stalin was instructed to prevent sailors from Kronshtadt from taking part in the rioting. Lenin was openly accused of being a German agent. The government sent for loyal 5th Army troops to restore order. This government crisis lasted until 7 August.

At Jasi, a Romanian and Russian Council of War reaffirmed their determination to open an offensive in spite of their knowledge about declining troop morale and discipline.

On 18 July, in Petrograd, officer cadets loyal to the government smashed and seized the offices of Bolshevik newspaper Pravda. Lenin was forced to go into hiding in Finland. The Kadets accused Aleksandr Helphand (Parvus) of being an agent of Kaiser Wilhelm II.

At Petrograd, the Minister of Justice published seized documents attempting to prove that Lenin and the Bolshevik party had received German funds and were guilty of high treason, ordering the arrest of Lenin. Relative peace was restored in the capitol. At Kronshtadt, the sailors voted to surrender and were disarmed.

On 19 July, on the Southwest Front, an Austro-German counter-offensive southeast of Lemberg and north of Brzezany, from Zloczow toward Tarnopol, smashed through the Russian 11th Army front east of Lemberg, forcing the Russian 7th and 8th Armies to retreat.

The insubordination of Russian troops played a major role in their defeat. In the days that followed all the Russian offensive gains were wiped out. The 11th, 7th and 8th Armies had lost over 58,000 reliable hand picked troops. By the end of the German counter-offensive on 3 August, over 42,000 Russian troops had deserted.

In Petrograd, Kerenskiy demanded as a condition of his retaining office, that the government should have complete executive control over the army without any interference from the Soldiers' Committees. He also demanded an end to all Bolshevik agitation and the arrest of Lenin and his associates. Government police quickly jailed Bolshevik leaders Kamenev and Trotsky. More than 15,000 loyal troops of the 5th Army arrived to restore order in the city.

At Helsingfors, Finland proclaimed its independence from Russia.

In the Black Sea, Russian minelayers laid 440 mines in and around the mouth of the Bosporus.

In Berlin , the German Reichstag approved a peace resolution by a vote of 214 to 116, which called for peace without annexations or indemnities.

On 20 July, at Petrograd , the Committee of the Duma protested against its exclusion from the process of formation of a new Provisional Government by Kerensky .

On 20-22 July, at Petrograd, Minister of War Alexander Kerenskiy established the Second Coalition Government. He also became Premier, succeeding Prince Lvov. The Provisional Government, composed of liberals, Mensheviks and SR's, was still in shaky control. The Red Guard, an industrial workers' militia, now had 10,000 men, but lacked enough arms to bring about a full scale revolution.

During July and August, General V.A. Cherimisov was appointed as commander of the 8th Army. General V.I. Selivachev replaced General L.N. Belkovich as commander of the 7th Army. General A.I. Denikin replaced General V.I. Gurko as Western Front commander. Geeneral V.N. Klembovskiy replaced resigning General A.M. Dragomirov as Northern Front commander. Many troops saw all these changes as the result of a lost cause.

On 21 July, on the Southwest Front, German troops reached the suburbs of Tarnopol. The British RNAS Armored Car Squadron was engaged in heavy fighting in rearguard actions.

In Warsaw, German Governor General von Beseler appealed to Josef Pilsudski to work with the Germans. Pilsudski refused and was soon imprisoned.

On 22 July, on the Northern Front, the Russian 5th Army offensive from the direction of Molodechno penetrated German defenses east of Vilna. The Russians took 1,000 German prisoners.

On the Western Front, the Russian 10th Army attacked south of Smorgon, near Krevo. They succeeded in breaking through German lines, but were eventually repulsed with heavy losses.

On the Southwest Front, the Austro-Germans captured Tarnopol.

On the Romanian Front, the Russian 4th Army, and the reorganized Romanian 2nd Army under General Averescu, launched an attack on Marashti. It was supported by a 48 hour heavy artillery barrage, between Focsani and the frontier in support of a rapidly worsening situation on Russian Southwest Front.