He was re-elected again in 2003, and in 2005 was appointed Internal Affairs Minister, serving in the cabinet until Labor pulled out of the government.

After being re-elected in 2006 he was appointed Minister of Science, Culture, and Sport in Ehud Olmert's government.

However, he resigned from the cabinet in November 2006 in protest against the nationalist Yisrael Beiteinu being added to the coalition; and was the only Labor Party minister to vote against the party coming into the government, stating in an interview: In the Labor leadership election in 2007 he came fourth in the first round, switching his support to eventual winner Ehud Barak in the second round.

In January 2010 Pines-Paz announced he was retiring from politics and leaving the Labor Party, which he said "had abandoned its values over the past 15 years".

He also served as deputy director-general of the Immigration and Absorption Department of the Jewish Agency for Israel.