Historians often approach territoriality, particularly territoriality enacted by the state, from a perspective of success. This paper, however, conceptualizes territoriality as an inherently incomplete process. In May 1864, a British consul in the Ottoman Empire reported that one hundred and fifty Circassian refugees died per day in overcrowded conditions in an encampment near Trabzon. Similar episodes occurred across the Black Sea coast that year, as hundreds of thousands of immigrants fleeing from the Caucasus overwhelmed Ottoman cities and towns. Immigrant settlement contributed to the centralizing Ottoman state’s attempt to make legible its population and territory. Nevertheless, repeated refugee crises in subsequent decades reflected the empire’s changing borders and the limits of its institutional capacity. Territorial loss and immigrant mortality are clear indicators of state failure, but rather than taking these failures at face value, this paper considers how failure functioned as a productive element of governance. Territoriality offers an essential example of “productive failure.” For example, the failure of modern governments to organize and regulate completely the circulation of people, goods, and resources in and through their territories allows states to continuously police borders. This paper argues that moments of “failure” identified by officials, immigrants, and other observers contributed to the development of immigrant settlement policies and the process of Ottoman territoriality. The Ottoman Empire’s international standing and its intensive debt in the second half of the nineteenth century circumscribed the state’s sovereignty and resources. Although Ottoman officials developed institutions and policies intended to rapidly and successfully settle immigrants, newcomers remained in temporary housing for months. After officials transferred immigrants to designated regions, some newcomers rejected settlement locations. The state’s inability to actualize projects allowed officials, immigrants, and other observers to leverage claims to expertise as they evaluated and adapted settlement policy. Ottoman officials’ portrayals of administrative failure contributed to plans to collect ever more granular data about the immigrant population. While the discourse of failure contributed to technologies of knowledge production among officials, immigrants mobilized failure to their own ends. In petitions, migrants claimed experience-based expertise and utilized knowledge of government policies to affect settlement outcomes. Finally, European observers mobilized the discourse of failure to comment on the limits of Ottoman governmental capacity. Overall, the inevitability of failure allowed it to be both anticipated and deployed to redirect power and resources.