He was first elected to the Knesset in 1981 on the Likud list. He was re-elected in 1984, but lost his seat in 1988. That year he was elected treasurer of the Jewish Agency and served in this position until 1992, when he returned to the Knesset. In 1998 he was appointed Minister of Finance, serving until the fall of Benjamin Netanyahu's first government in 1999. He returned to the cabinet in 2001 as Minister of Justice. After being re-elected in 2003, he was appointed Minister in the Ministry of Finance, where he worked closely with then Minister of Finance Netanyahu who was spearheading a sweeping privatization reform. He was appointed Minister of Transportation in 2004, and later served as Minister of Education, Culture and Sport until 2006.