He participated in underground groups in Riga and Minsk and was arrested several times. In 1909 he was arrested and sentenced to four years imprisonment, followed by exile to Siberia.

He fled Siberia and spent time in Germany and France before returning to Russia in 1917.

In 1918 Dimanshteyn worked in the People’s Commissariat for Nationalities and was commissar of its Jewish section. In 1925 the Society for the Settlement of Jewish Toilers on the Land (OZET) was founded and Dimanshteyn became its chairman. OZET was the organization that established the Jewish Autonomous Region of Birobidzhan, where Yiddish was one of the official languages.

Aside from his positions in the Soviet government, Dimanshteyn worked as the editor for a number of Yiddish language publications, including the first Soviet Yiddish newspaper, Di varhayt (1918), and its successor, Der emes (1918–1919). He wrote numerous articles and books in Yiddish and Russian, such as Еврейская автономная область: детище Октябрьской революции (The Jewish Autonomous Region: Child of the October Revolution), as well as prefaces to various collected works. In 1935, Dimanshteyn edited the collection Yidn in FSSR (Jews in the USSR).

In 1936 Dimanshteyn was accused of holding unsanctioned negotiations with Di Yidishe Kolonizatsye Organizatsye in Ratnfarband (Organization for Jewish Colonization in the USSR), and his party status began to decline. While speaking at OZET in 1937, Dimanshteyn was sharply criticized by lower-ranking party members. In November 1937, he was accused of expressing “bourgeois nationalism” for his view that people should elect members of their own ethnic group to the Supreme Soviet. He was arrested on 18 February 1938 and executed on August 25, 1938 for belonging to a counterrevolutionary terrorist organization.