After he left prison, he rejoined the government as an official of the Foreign Ministry, and in 1884 was sent to Europe for studies.

Mutsu was the lead Japanese negotiator in the Treaty of Shimonoseki, which ended the First Sino-Japanese War (1894–1895).

In the wake of an attempt on the life of the Chinese leading negotiator Li Hongzhang by a Japanese fanatic, the Japanese government voluntarily reduced the size of the indemnity it planned to claim from China, and Mutsu famously remarked, 'Li's misfortune is the good fortune of the Great Ch'ing Empire'.

He resigned all government posts in May 1896 and moved to Ōiso, Kanagawa, where he wrote his personal diplomatic memoirs Kenkenroku [ja] (蹇々録) after the treaty was signed to explain his views and actions.

Mutsu was ennobled with the title of hakushaku (count) under the kazoku peerage system at the end of the Sino-Japanese War.