The Grafton ministry arose from the gradual decay of its predecessor, the Chatham ministry, which Grafton had effectively been leading for some time due to the illness and withdrawal from public affairs of its nominal head Lord Chatham.

In order to maintain a comfortable parliamentary majority, Grafton had drawn the Bedford Whigs (Earl Gower, Viscount Weymouth, and the Earl of Hillsborough) into the ministry at the end of 1767.

Although Grafton himself and many of the previous members of the government (including Chatham) supported a conciliatory policy towards Britain's restless American colonies, the Bedfords favoured stronger, more coercive measures, and the ministry, in spite of Grafton's own views, drifted towards the Bedford position.

When this led to an attempt to replace the conciliatory Southern Secretary, Lord Shelburne, Chatham finally roused himself enough to resign from his position as Lord Privy Seal, leaving Grafton as the nominal as well as real head of a ministry in which the Bedford faction was now stronger than ever.

The government was widely criticised for its handling of foreign affairs, particularly for allowing the Republic of Corsica, a British ally, to fall to the French during the Corsican Crisis.