When Holtzman returned to New York City in 1935, he joined the WPA Federal Art project, but was first assigned to write for the public relations department, since his art was considered too extreme for public placement. When Diller was promoted as managing supervisor of the Mural Division in New York, he appointed Holtzman as his assistant supervisor in charge of the abstract mural painters. In 1936 Holtzman was instrumental in bringing together the nucleus of painters and sculptors who established the American Abstract Artists in 1937. Although he opposed the group’s emphasis on exhibitions, and the attempts of certain influential members to exclude all but “pure-abstractionists”, Holtzman maintained an active role for several years, serving as secretary in 1938 and again in 1940 and arranged for the three-week AAA exhibition and its educational component at the American Art Today Building of the New York World’s Fair in 1940, directed by Holger Cahill.