He returned to his native Ioannina, then a prospering city with a large expatriate merchant class and a major cultural center of the Ottoman Greek world.

During this time he enhanced the school's curriculum by introducing lessons in history, geography, natural sciences, economics and foreign languages.

Psalidas also brought with him educational equipment and special instruments in order to teach astronomy and perform a number of chemical and physical experiments.

Psalidas had also to deal with conservative circles, who distrusted and bitterly criticized his innovations and promotion of the "atheist" ideas of Voltaire and many of the ideals of the French Revolution.

Psalidas found refuge in nearby Zagori, when armed conflict between Ali Pasha and the Ottoman Empire broke out (1820–1822).Thereafter he lived in Corfu, where he became doctor of the Ionian Academy, but he was denied the opportunity to teach because of his progressive ideas.