Under Soviet rule many Jewish artisans began working in factories, but a considerable number continued to practice their traditional trades. Perets Markish (1895-1952) a well-known Soviet Yiddish poet and playwright, was born in Polonnoye. In the early 1930s a Jewish kolkhoz was established on the outskirts of town. Polonnoye had a government-sponsored Yiddish school. On the eve of World War II the town's 4,171 Jews comprised 30 percent of the total population.
The Germans occupied Polonnoye on July 6, 1941. Only few Jews managed to flee the town before the German occupation. At the end of August a headquarter's unit of Einsatzgruppen C murdered over one hundred Jewish men in the town. On September 2, 1,275 Jews were murdered in the forest on the outskirts of the town. 15 Jewish families (nearly 50 Jews), refugees from Polonnoye, were executed in Lyubar (Zhitomir District), along with local Jews, in the same month. In October 1941 the approximately 1,300 Jews (mainly skilled workers and their families) who had been left in the town, as well as some other Jews from nearby villages, were locked into the ghetto located on the town's outskirts at the former granite quarry on Baranovskaya Street. Before the war the place was used as a Soviet concentration camp for "public enemies." The ghetto was surrounded by barbed wire and guarded by Ukrainian policemen. The inmates were housed in several barracks. A Jew named Rogel was appointed ghetto elder. The Jews were ordered to wear yellow patches on their chests and backs and to perform various kinds of forced labor, such as removing tombstones from the old Jewish cemetery. Apparently in the late autumn of 1941, the Jews from the nearby village of Labun (or Novo Labun), as well as some specialists from the town of Poninka, were also incarcerated in the ghetto. Due to the crowding, hunger, and poor hygienic conditions typhus broke out in the ghetto and claimed many victims. According to one testimony, from time to time old and sick people were taken from the ghetto and shot to death.
On June 25, 1942 almost all the 750 inmates of the ghetto (except for several specialists) were murdered by a German unit outside the town, near the Poninka train station.
Polonnoye was liberated by the Red Army on January 8, 1944.