After the Meiji restoration, the village of Arao was established with the creation of the modern municipalities system on April 1, 1889.

Arao has a mayor-council form of government with a directly elected mayor and a unicameral city council of 18 members.

In terms of national politics, the city is part of the Kumamoto 2nd district of the lower house of the Diet of Japan.

Arao's political concentration is on tourism, to try to lure people back to this once heavily populated land.

One notable local product of this city is Shōdai ware, an art form almost completely exclusive to Arao, involving slow kilning and under glazing.