In January 1995, he was nominated Minister of Foreign Affairs of Slovenia in the government of Janez Drnovšek, after Lojze Peterle of the Slovene Christian Democrats had resigned.
Thaler's term in office was marked by tensions with neighbouring Italy, which had already begun in the previous years.
The disagreements between the two countries were mostly centered around the issue of property restitution to Italian refugees from Yugoslavia from the late 1940s.
During his mandate, the Parliament ratified the Association Agreement with the EU, after having changed the Constitution a day earlier in accordance with the Spanish compromise.
In March 2011, The Sunday Times implicated Thaler among other members of the European Parliament in a cash-for-laws scandal.
Rupert Murdoch's Sunday Times also provided edited video of Thaler discussing adding amendments to EU laws with undercover journalists.