Shidehara was elevated to the title of danshaku (baron) under the kazoku peerage system in 1920, and appointed to a seat in the House of Peers in 1925.

Despite growing Japanese militarism, Shidehara attempted to maintain a non-interventionist policy toward China, and good relations with Great Britain and the United States, which he admired.

In October 1925, he surprised other delegates to the Beijing Customs Conference in pushing for agreement to China's demands for tariff autonomy.

Disgruntlement by the military over Shidehara's China policies was one of the factors that led to the collapse of the administration of Prime Minister Wakatsuki in April 1927.

At one press conference, an American reporter was confused regarding the pronunciation of Shidehara's name: the foreign minister replied, "I'm Hi(he)-dehara, and my wife is Shi(she)-dehara."

Shidehara returned as Foreign Minister in 1929, and immediately resumed the non-interventionist policy in China, attempting to restore good relations with Chiang Kai-shek's government now based in Nanjing.

This policy was assailed by military interests who believed it was weakening the country, especially after the conclusion of the London Naval Conference 1930, which precipitated a major political crisis.

In September 1931, the Kwantung Army invaded and occupied Manchuria in the Manchurian Incident without prior authorization from the central government.

Shidehara, in his memoirs Gaikō gojūnen ("Fifty-years Diplomacy", 1951) also admitted to his authorship, and described how the idea came to him on a train ride to Tokyo.

Shidehara joined the Liberal Party a year later, after Prime Minister Tetsu Katayama formed a socialist government.