There he received charters (the "Serbian Privileges" of 1690, 1691, and 1695), granted to him by Emperor Leopold I, securing religious and ecclesiastical autonomy of Eastern Orthodoxy in the Habsburg Monarchy.

Until death, in 1706, Patriarch Arsenije remained the head of Serbian Orthodox Church in Habsburg lands, laying foundations for the creation of an autonomous ecclesiastical province, later known as the Metropolitanate of Karlovci.

As the war approached, and Serbs from Dalmatia, Herzegovina and the Bay of Kotor already took to arms, Arsenije III continued with his regular duties visiting Slavonia in 1684, but on the other hand secretly maintained contacted with forces of the League, particularly those of the Republic of Venice and the Archduchy of Austria.

In 1685, Serbs in Montenegro and Dalmatia under the leadership of local guerilla leaders, such as Stojan Janković, fought in the ranks of the army of the Republic of Venice, led by Francesco Morosini (1619–1694), against the Ottoman Empire in the Morean War.

The passing Ottoman armies plundered the local populace mercilessly; the worst of them all was the one under notorious Yeğen Osman Pasha who for two years (1687–89) robbed the area from Belgrade to Ohrid and from Sofia to Peć.

Representatives of Leopold I, Holy Roman Emperor warned Arsenije that unless he renewed his cooperation with the Habsburgs, they would see to the election of a more obedient patriarch.

According to one letter written by Catholic bishop Peter Bogdani, rebellious Rumelian beylerbey Yeğen Osman Pasha threatened to cut off the head of Čarnojević because he allegedly received money from Habsburgs to instigate anti-Ottoman rebellion of Orthodox Serbs.

Louis William, Margrave of Baden-Baden called Arsenije III to raise arms against the Turks; the patriarch accepted and returned to the liberated Peć.

The letter of invitation urged Serbs and other Balkan nations to rise up against the Ottomans, promising them liberties, including freedom of religion for their loyalty to the Habsburg monarchy.

[17] With continued Ottoman plundering and an exodus impending, Arsenije III organized the first ecclesiastical and national gathering in Belgrade (Beogradski sabor) on 11 June which met and decided to accept Leopold as Serbian king, and to send Bishop Isaija Đaković to Vienna as their representative for negotiations with the Emperor.

[17] In grave need of soldiers and farmers, on 21 August, Leopold issued his first Chapter on Privileges in which he recognizes Serbs within the Habsburg monarchy as a separate political entity (corpus separatum) under the Serbian Orthodox Church.

Soon, Arsenije III was upset by news that the clergy of the Roman Catholic Church was forcing the newly arrived Serbs to convert.

In the following years, Arsenije III traveled through the Habsburg realms, including the Kingdom of Hungary, Croatia and Slavonia with this diploma allowing him to stop the forceful conversions, ordering new priests and organizing the church.

As the religious pressures mounted, Serbian leaders met in 1694 in Baja demanding a separate territory where Serbs would settle – Slavonia and Srem were proposed.

Upon the advice of the proselyte fanatic Cardinal Leopold Kolonić, in 1701 the rights of Arsenije III as the "Serbian Patriarch" were limited to the newcomers living in the vicinity of Szentendre and he was reduced in rank to the "Metropolitan", a title which was never accepted by Serbs.