In April 1921, he resigned from the civil service and renounced his pension entitlements, assuming the political post of Reich Plenipotentiary of the Foreign Trade Office.

After the Nazi seizure of power on 30 January, Pfundtner, with his vast knowledge and experience of ministerial bureaucracy, was appointed the State Secretary in the Reich Ministry of the Interior under Wilhelm Frick on 3 February 1933.

[5] Pfundtner soon set in motion plans to purge the civil service of Social Democrats and others perceived to be opponents of the regime, to be replaced by Nazis.

As early as 4 July 1933, in a speech to the Academy for Administrative Science, Pfundtner announced plans for a new law that would distinguish between those inhabitants possessing German or "alien" blood.

[6] On 25 August 1933, Pfundtner signed the Erste Ausbürgerungsliste des Deutschen Reichs von 1933 [de] (first expatriation list), revoking the citizenship of 33 Germans, mostly opposition politicians and journalists, among them Albert Grzesinski, Philipp Scheidemann, Bernhard Weiß and Otto Wels.

[7] On 13 September 1935, together with his Ministerialdirektor (Ministerial Director) Wilhelm Stuckart, Pfundtner met in Nuremberg with Hitler, who instructed them to prepare a law to address marriages between Aryans and non-Aryans.

They set to work immediately, enlisting the assistance of Ministerialrat (Ministerial Councilors) Bernhard Lösener and Franz Albrecht Medicus [de], as Hitler wanted to have the proposal passed by the Reichstag when it met on 15 September.

[10] On 19 August 1943, Pfundtner submitted his resignation as State Secretary, at the same time that Frick was removed as Interior Minister in favor of Reichsführer-SS Heinrich Himmler.