In 1878 Dodds was asked to stand for parliament, was elected to the Tasmanian House of Assembly for East Hobart, and was given a seat in the William L. Crowther ministry as attorney-general in December 1878.
When W. R. Giblin formed his coalition ministry in October 1879 Dodds held the same position until December 1881, when he exchanged it for that of colonial treasurer.
In 1887 he was appointed one of the representatives of Tasmania at the colonial conference held at London, and while on the voyage was offered and accepted the position of puisne judge of the supreme court.
Dodds was in office for practically the whole of his nine years in parliament and did some excellent work, succeeding in obtaining reductions in mail subsidies, and reducing the rates for postages and telegrams.
As chief justice and lieutenant-governor his duties were always admirably discharged, and as chancellor of the University of Tasmania, president of the Art and other societies, he did much to foster the cultural life of Hobart.