Within two months of the Mongolian Revolution and the establishment of the revolutionary government in July 1921, Danzan lost his seat as party leader to Tseren-Ochiryn Dambadorj, a relative of Prime Minister Dogsomyn Bodoo.

[3] He exploited the angry public backlash to Bodoo's unpopular campaign (initially instigated by the Soviets) to "modernize" the people by forcibly cutting off “feudal” ornaments from Mongolian deels such as large cuffs, women's jewelry, and even long hair.

[4] Danzan also accused the Prime Minister of plotting with the independence leader Ja Lama and with the Chinese and Americans to undermine the revolution and establish an autocratic government.

[5] Political infighting continued within the party and a rivalry developed between Danzan and Rinchingiin Elbegdorj, leader of the leftists and chief adviser to the Comintern in Ulaanbaatar.

Rinchingiin Elbegdorj and Dambadorj (head of the right-wing faction) both accused Danzan of representing bourgeois interests and engaging in business with American and Chinese firms.

[7] Danzan and Bavaasan, head of the Revolutionary Youth league, were arrested together with several other delegates, quickly put on trial, sentenced to death, and shot: all within a period of 24 hours while the party congress continued to meet.

He was vilified as a Japanese spy and a whisper campaign accused him of murdering Mongolia's revolutionary hero Sükhbaatar[10] who had died unexpectedly in 1923 at the young age of 30.