He became an MP in 1964, representing Birmingham Sparkbrook. He was a Foreign Office minister in the Labour government in the 1970s, joining the cabinet as Secretary of State for Prices and Consumer Protection in 1976, a position he held until Labour's defeat in the 1979 General Election.
In 1983 he became Deputy Leader of the Labour Party, elected on the "dream ticket" with Leader Neil Kinnock: Kinnock was seen as a representative of the left of the party and Hattersley of the right. The team resigned after their second general election defeat in 1992. Hattersley left the Commons at the 1997 General Election and was made a life peer as "Baron Hattersley, of Sparkbrook in the County of West Midlands".
Hattersley was long regarded as being on the right of the party, in the tradition of Hugh Gaitskell and Anthony Crosland, but with "New Labour" in power he found himself criticising a Labour government from the left. He has written a column in The Guardian for many years and is the author of many books including novels, biographies and the diaries of his dog, Buster.
His slight speech impediment led to him being portrayed on the satirical television puppet programme Spitting Image as someone who showered his audience with saliva each time he spoke. A last-minute failure to appear on the satirical television programme Have I Got News For You famously led to his place being taken by a tub of lard.