Callahan defeated incumbent Bethlehem Mayor James Delgrosso in the 2003 Democratic mayoral primary election. He was elected mayor in the November 2003 general election, taking over 60% of the popular vote and winning every ward in the city. He was inaugurated on January 5, 2004 for a two-year term. Callahan was re-elected in the 2005 primary elections and ran unopposed in the general election. He was sworn in for his first four-year term on January 3, 2006, and was re-elected in 2009.