On the surface Domitian's reign consisted of no more 'terrorizing' acts than the emperors that preceded him, but his relationship with the senate and aristocracy helped to foster a tarnished image. Additionally his strict moral policies, including religious censorship in the form of Jewish (which in Domitian's view included Christians) taxation, helped establish an appearance of persecution that some later writers mistakenly focused on. His father, Vespasian, had already established a Jewish tax (fiscus ludaicus) as a form of punishment to the Judaeans for their disloyalty. The proceeds humiliated the Jews by funding the pagan Temple of Jupiter, but the payments did allow them to continue in their own faith without recourse from Rome. Domitian sought to expand the tax to anyone who appeared to live a Jewish lifestyle avoiding the imperial and traditional pagan cults.
This concept included the fledgling Christian community who shared a great deal of traditional customs and ideology with the Jews. Domitian viewed such monotheistic faiths as a form of atheism, since these people denied the true Roman pantheon. While such an attitude later developed claims of a great Christian persecution (beginning largely with Christian writers Eusebius and Tertullian), Domitian's policy remained one of taxing those who refused the Roman pantheon, not singling out religious deviants for execution or other physical punishments. While Domitian has been described by many as having a streak of cruelty, there is little evidence to suggest this cruelty was applied specifically or any more so to Christians as opposed to just about anyone who might appear a threat to the throne or imperial stability.
One example of a story altered to fit into the persecution ideal was that of Flavius Clemens, his wife Domitilla and Acilius Glabrio. Domitilla was exiled and the two men executed for reasons which aren't entirely clear, but the three were later adopted as early Christian martyrs. A lesser charge of 'atheism' was referenced in the account of Dio Cassius (leading to the assumption of Christian leanings), but Suetonius makes no mention of religious charges at all. Whatever the reasons for their punishment, it should be noted that it certainly wasn't because of Christianity. The early Christians in the late 1st century avoided public life entirely and shunned the lifestyle that an aristocratic Roman family would have had, and Jews of the same era would have had similar dispositions. While the three may have been sympathetic to Jews because of taxes or other various concerns, the true reasons for their punishments are completely unknown to history.
While Christian and Jewish relations would haunt Domitian in the centuries after his death, his main opposition was based mainly in aristocratic Rome. The people, largely immune to the daily treachery of imperial politics, seem to have had little problem with Domitian and likely adored the man who readily held large games and offered public donation. Additionally, while sometimes the term 'Stoic Opposition' is applied to Domitian, this slight rift from the philosophic community was largely a continuation of displeasure based on Vespasian establishing a hereditary monarchy rather than anything specific regarding Domitian. Of course, one must take into consideration the fact that Dio Cassius (one of Rome's great historians) was exiled during Domitian's reign for political discourse and his later historical accounts regarding Domitian's reign can be viewed with a particular bias. Despite this rather obvious problem to what would become his historical record it was the enmity with the aristocrats that would leave Domitian with a horrible legacy. His open contempt of the Senate as a contributing and governing body for the empire was not tempered in any way by conciliatory gestures. Domitian rarely consulted them, as opposed to Vespasian and Titus, who sat before the senate on regular intervals. Also unlike his brother and father, Domitian adopted an autocratic style coupled with what might be regarded as egomaniacal behavior. Having himself referred to as Dominus et Dues (master and god), renaming the month of September to Germanicus to commemorate his supposed military victories, and renaming October to Domitianus was a constant reminder to the rest of Rome that the eternal city was not a veiled Republic but truly was an empire at the whims of a single man.
The most revered of political offices, that of the consulship was long abandoned as truly elected office and Domitian takes blame for having restricted this office to himself and his family members. However, Domitian was actually less strict than his father in appointing Consuls and other office holders, while Vespasian's rule was openly praised. While Domitian personally held the consulship in all but 4 years of his reign, 12 of 16 ordinary consulships between 89 and 96 went to non family members, clearly demonstrating his openness to political reward. Additionally, Domitian was also quite aware of Senatorial and familiar tradition allowing several men of pro-consular families to re-assume that position during his reign. Domitian understood the need to placate the Senate with political appointment but his treatment of them as a governing body seems to have carried more weight.
Domitian also angered the Senate by his self appointment as perpetual censor. With that power he had complete privilege and authority to alter the Senate roles as he saw fit. He used that power to appoint several (up to 24) eastern new-men who as non Italians were clearly not welcome additions by their Senatorial brothers. The equestrian order also received preference from Domitian in various appointments such as provincial governorships. As opposed to major military commands being selected from the Senatorial elite under previous emperors, Domitian chose equestrians for command of the Praetorian Guard and the top status in the Dacian campaign. Aside from these apparent slights the so-called 'Reign of Terror' really came down to a short-lived series of treason trials near the end of his Domitian's reign. As many as 11 former consuls were executed while many other senators were exiled during this period and Dio suggests far more, though names are not given. These executions, often compared to the reign of Claudius in which at least 35 senators and hundreds of equestrians were executed, hardly seem to be reminiscent of terror in contrast to Claudius' later deification. However, Claudius' deification was a political move intended to tie Nero and even the Flavians closer to the Julio-Claudians where Domitian was politically built up as a 'storm before the calm' to help solidify the good qualities of successors such as Trajan.
Domitian, while assuredly not deserving of praise as a great misunderstood leader by any stretch, has been victimized by the scourge of political jealousy. While he made blunders in military affairs (including possibly the withdrawal of Agricola from Britain) and held poor relations with the rest of aristocracy, the provinces were largely well governed and his reign was bereft of any terrible crisis. Aside from the rather uneventful attempt by Saturninus to rebel, the army remained loyal for all of Domitian's 15 year reign. Even members of the opposition seem to have obtained positions of importance. Tacitus, clearly opposed to the emperor because of the treatment shown to his father-in-law Agricola, was largely prosperous in the time period. Pliny the younger too, another member of the 'opposition', advanced greatly under Domitian. The true nature of Domitian's legacy seems to be related to his contemptuous attitude towards the Senate, and reliance upon freedmen as imperial administrators, apparently more than anything else.
Ironically, it's the very freedmen who served him who would end up putting an end to his life. As Domitian's reign lengthened he did grow increasingly more paranoid. The 'terror' it seems was not necessarily entirely because of his deeds, but because of the threat. The execution of household secretary Epaphroditus seems to have initiated the idea of a plot. The growing unpredictability and paranoia of the empire made everyone within the household seemingly in a position of danger. While the aristocracy seems to have been largely left out of any role in the plot, the calmness of events following Domitian's death would tend to suggest otherwise. On September 18, AD 96 a conspiracy of household freemen and slaves was put into motion and Domitian was brutally stabbed to death. Nobody else in the household was injured or killed and there was no retaliation by praetorians. The Senate, upon 'hearing the news' calmly nominated the aged aristocratic veteran M. Cocceius Nerva to replace him. The importance of this nomination was that Nerva did not have any children and would be incapable of establishing a dynasty of heredity. This gesture helped to placate such powerful generals as Trajan who understood that they might yet have a chance to reign if they only bided their time. In order to settle matters completely, Nerva wisely adopted Trajan as his heir and the precedent was set for the '5 Good or Adoptive' Emperors. The relative ease with which the transition took place leaves the impression that the plot was much larger than being motivated by simple household fear. Dio suggests Nerva was directly involved and that Domitian's wife, Domitia, was as well, but if she was as a matter of personal necessity, she maintained a front of loyalty for all her remaining years. Even 25 years later she still referred to herself as 'Domitian's wife'.