Generous fiefs and donations drove the Swedish Crown into financial difficulties, and the only way to save the situation was to use reductions, i.e. to return the fiefs to the Crown. Kajaani Castle returned to the possession of the Crown in 1681.

The Crown regarded the castle as old-fashioned and unnecessary, and even considered its closure. Eventually, the doors of the castle were not closed, but the number of troops was reduced to a minimum. In the event of a threat of war, Paltamo and Sotkamo peasants were obliged to send 150 men with the town guard as reinforcements.

In the beginning, daily life in the castle was peaceful. The Great Northern War broke out in 1700, but it did not affect Kajaani immediately. The situation in Kainuu was calm thanks to an agreement made for peace on the Eastern border with Karelians living on the other side of the border in 1703. The peace was broken on 13 March 1712 when the Karelians and Russians attacked the town of Kajaani. After burning and pillaging part of the town, the enemy withdrew.

The Russians occupied the whole of Southern Finland in 1714. Kajaani as a remote town that was difficult to access remained outside the war for a longer period. During this period, the castle was equipped for any future attacks. The top parts of both towers were pulled down and replaced with batteries. A thick layer of peat was piled up to protect the walls of the castle. A total of seven batteries were constructed: the batteries of the eastern tower were named Ulrika and Hessen Cassel and those of the western tower Carolus and Gloria, while Armfelt was responsible for defence at the gate facing the town and Clerck on the north-eastern gate. The seventh battery, Victoria, was situated on top of the Tauhasentorni Tower. Stones and chevaux de frise were placed upstream of the Linnaluoto islet as obstacles. The remaining parts of the town were burnt to prevent the enemy from using the buildings as shelter.

In 1715, a small unit of Russian troops moved in on the castle twice. The defenders of the castle held on, and the Russians had to withdraw. At that time, the castle was the only base the Swedes had in Finland.

In January 1716, a large unit of Russian troops approached the castle. According to legend, there were almost 4,000 Russian men. They began a systematic siege of the castle by constructing earthworks and batteries on both sides of the river. The castle and its troops consisting of approximately 50 men were under artillery fire day and night for over a month. When the siege became protracted, the food, firewood and ammunition supplies of the castle depleted. As the situation seemed desperate, the defenders agreed on surrender and opened the gates on 24 February 1716. The Russians had promised that the defenders could leave the castle freely, but did not, in the event, allow this; all the defenders were taken prisoner and sent to Russia. The Russians vacated the castle and blew it up as they left using the gunpowder left behind by the defenders.

After the Great Northern War, reconstruction of Kajaani Castle was started, but it was not given priority in the kingdom that was crushed by war. The work on the castle progressed slowly, and renovation measures were gradually stopped. In 1793, the fortress was abandoned. Kajaani Castle lost its strategic importance in 1809 when Finland became an autonomous part of Russia as the Grand Duchy of Finland.

Although the castle was no longer used, the island on which it was built retained its role as a route over the Oulujoki water system. Since the first years of the 1600s, a road had run across the river through the castle and its gates. Therefore, each traveller first walked through the castle and later through the ruins. The bridge, which was in poor condition, was replaced in the early 1840s and renovated in 1886. The current concrete bridge passing over the ruins was constructed in 1937.

Day trip to the Kajaani Castle Ruins