After serving as the president of the National Physician Support Association, Lai ran in the 1996 Legislative Yuan election, winning a seat representing Tainan City.

On 24 November 2018, Lai announced his intention to resign from the premiership after the Democratic Progressive Party suffered a major defeat in local elections, and left office on 14 January 2019 after the swearing-in of his successor Su Tseng-chang.

[16] After serving as part of the support team for Chen Ding-nan's unsuccessful electoral bid for Governor of Taiwan Province in 1994,[17] Lai decided to enter politics and leave his medical career.

Lai then joined the New Tide faction and stood as a candidate in the 1998 Legislative Yuan election, representing the Democratic Progressive Party in the second ward of Tainan City.

As a result of his strong showing in the mayoral election coupled with his relative youth and his control of the DPP heartland city of Tainan, Lai was considered to be a potential candidate for a presidential run in 2016.

[25] Lai made on 5 June 2014 a visit to the city of Shanghai to assist an exhibition of art by the late Taiwanese painter Tan Ting-pho and met politicians of the Chinese Communist Party.

[40][41] Lai has appeared to have moderated his position on Taiwanese independence particularly when he proposed the idea of "being close to China while loving Taiwan" in June 2017.

[46] However, on 20 October, in response to General Secretary Xi Jinping's comments on the one China policy and the 1992 consensus at the 19th National Congress of the Chinese Communist Party, Lai said that the Taiwanese government, following the directives of Tsai Ing-wen, would fulfill its promise of not changing the status quo between the two neighbors and not ceding before pressure from Beijing, which comes in the form of military intimidation and an international blockade.

[48] Lai agreed to remain in office to help stabilize the government until the general budget was cleared by the Legislative Yuan in January 2019.

[51][52] On 18 March 2019, Lai Ching-te registered to run in the Democratic Progressive Party presidential primary, saying that he could shoulder the responsibility of leading Taiwan in defending itself from being annexed by China.

[61] After the assassination of former Japanese prime minister Shinzo Abe, he made a private trip to Tokyo to pay his respects and became Taiwan's most senior official to visit Japan in five decades.

[62] In November 2022, Lai led representatives of Taiwan's travel agencies and industry associations to Palau to foster collaborations between the two countries.

[63] In November 2022, president Tsai Ing-wen resigned as leader of DPP after the party's heavy losses in local elections.

[66][67] In March 2023, Lai registered as the only person to run in the DPP's 2024 presidential primary and was officially nominated by the ruling party in April.

[68][69] On 21 November 2023, Lai formally registered his campaign at the Central Election Commission along with his running mate, Hsiao Bi-khim.

[70] Lai claimed victory on 13 January 2024, marking the first time that a political party had won three consecutive presidential terms since direct elections were first held in 1996.

[77] As the mayor of Tainan, Lai called himself a "pragmatic worker for Taiwanese independence" and argued it was possible to "love Taiwan while having an affinity to China".