Fukuda ran for the House of Representatives in 1990 and won a seat. He was elected deputy director of the Liberal Democratic Party in 1997 and became Chief Cabinet Secretary to Yoshiro Mori in October of 2000. He resigned his position as Chief Cabinet Secretary on 7 May 2004 amid a large political scandal related to the Japanese pension system. He remains a representative in the Lower House.

Fukuda was considered a contender for the leadership of the LDP in 2006, but on 21 July he decided that he would not seek the nomination. Instead, Shinzo Abe succeeded Junichiro Koizumi as leader of the LDP and Prime Minister of Japan.

One of his most noted policy goals is to end prime ministerial visits to Yasukuni Shrine. In June 2006, Fukuda joined 134 other lawmakers in proposing a secular alternative to the shrine, citing constitutional concerns.

Following Abe's resignation in September 2007, Fukuda announced that he would run in the LDP leadership election. Because the LDP holds a majority in the House of Representatives, the party's leader will automatically become Prime Minister. Fukuda received a great deal of support in his bid for the party leadership, including that of the LDP's largest faction, led by Foreign Minister Nobutaka Machimura, of which Fukuda is a member. Finance Minister Fukushiro Nukaga‎, who initially had intended to run for the leadership, also backed Fukuda. Tarō Asō was considered Fukuda's main competitor for the leadership but Fukuda was strongly favored to win, with even Asō publicly acknowledging the likelihood of his victory.

In the election, on 23 September, Fukuda defeated Aso, receiving 330 votes against 197 votes for Aso. Fukuda is expected to be formally elected as the next prime minister on 25 September.