He has been a Liberal Member of Parliament for Ottawa South since 1988 and a Cabinet Minister since 1993, when the Liberals came to power under Jean Chrétien. From 1993 to 2000 he served as Minister of Industry, and from 2000 to 2002 as Minister of Foreign Affairs. In 2002 he was appointed as Deputy Prime Minister and later added Minister of Finance to his responsibilities.
With former finance minister Paul Martin, Jr and heritage minister Sheila Copps, Manley was one of three candidates in the 2003 Liberal Party leadership race to succeed Chrétien. Manley's campaign proved disappointing, and on July 22, 2003 he withdrew from the race, conceding defeat to frontrunner Martin and offering him his backing.
Upon Martin's victory on November 14, 2003 political commentators openly wondered whether someone so closely linked to Chrétien would avoid a potentially embarassing demotion in Martin's new cabinet. On November 28th, Manley announced his retirement from politics. Martin offered him a role as Ambassador to the United States, a prestigious posting Manley said he would seriously consider. Several days after Prime Minister Martin was sworn-in, Manley announced he would not accept the ambassadorial appointed. Shortly thereafter, Dalton McGuinty, Premier of Ontario and close friend of Manley, appointed him to chair a royal commission on the energy system of Ontario in the wake of the eastern North American blackout of 2003.