In 1946, Lynch has his first involvement in politics when he is asked by his local Fianna Fáil cumann to stand for Dáil Éireann in a by-election. Over the next 35 years he serves as Parliamentary Secretary to the Taoiseach (1951-54), Parliamentary Secretary to the Minister for Lands (1951-54), Minister for the Gaeltacht (March 1957-June 1957), Minister for Education (1957-59), Minister for Industry and Commerce (1959-65), Minister for Finance (1965-66), Leader of Fianna Fáil (1966-79), Leader of the Opposition (1973-77), and 5th Taoiseach of Ireland (1977-79).
The year 1979 proves to be the year in which Lynch finally realises that his grip on power has slipped. The first direct elections to the European Parliament take place in June and see the electorate severely punishing the ruling Fianna Fáil party. A five-month postal strike also led to deep anger amongst people all over the country. On 27 August 1979, the Provisional Irish Republican Army assassinates Earl Mountbatten of Burma in County Sligo. On the same day the IRA kills 18 British soldiers at Warrenpoint in County Down.
A radical security review and greater cross-border co-operation are discussed with the new British Prime Minister, Margaret Thatcher. These discussions lead Síle de Valera, a backbench TD, to directly challenge the leadership in a speech at the Liam Lynch commemoration at Fermoy, County Cork, on September 9. Although Lynch quickly tries to impose party discipline, attempting to discipline her for opposing party policy at a parliamentary party meeting held at September 28, de Valera correctly points out that she had not opposed the party policy regarding the North which called for the declaration of the British intent to withdraw from the north. The result is embarrassing for Lynch.
The visit of Pope John Paul II to Ireland in September proves to be a welcome break for Lynch from the day-to-day running of the country. In November, just before he departs on a visit to the United States he decides that he will resign at the end of the year. This would allow him to complete his term as President of the European Community. The defining event which makes up his mind is the news that Fianna Fáil had lost two by-elections on November 7 in his native Cork (Cork City and Cork North-East).
In addition during the trip Lynch claims in an interview with The Washington Post that a five-kilometre air corridor between the border had been agreed upon during the meeting with Thatcher to enhance security co-operation. This is something highly unsavory to many in Fianna Fáil. When Lynch returns he is confronted openly by Síle de Valera, Dr. Bill Loughnane, a noted hardline Republican backbencher, along with Tom McEllistrim, a member of Charles Haughey‘s gang of five, at a parliamentary party meeting. Lynch stated that the British do not have permission to overfly the border. Afterwards Loughnane goes public with the details of the meeting and accuses Lynch of deliberately misleading the party. An attempt to remove the whip from Loughnane fails.
At this stage Lynch’s position has become untenable, with supporters of Haughey caucusing opinion within the party. George Colley, the man whom Lynch sees as his successor, comes to him and encourages him to resign sooner. Colley is convinced that he has enough support to defeat the other likely candidate, Charles Haughey, and that Lynch should resign early to catch his opponents on the hop. Lynch agreed to this and resigns as leader of Fianna Fáil on December 5, 1979, assured that Colley has the votes necessary to win. However, Haughey and his supporters have been preparing for months to take over the leadership and Lynch’s resignation comes as no surprise. He narrowly defeats Colley in the leadership contest and succeeds Lynch as Taoiseach.
Lynch remained on in Dáil Éireann as a TD until his retirement from politics at the 1981 Irish general election.