In 1848, Donaldson was elected a member of the original unicameral Legislative Council of New South Wales, representing the County of Durham from February 1848 to January 1853. Comments made while running for re-election in 1851, led Sir Thomas Mitchell to demand a public apology. While Donaldson complied Mitchell was not satisfied and challenged Donaldson to a duel with pistols. Both men missed but they remained antagonised. He supported the development of steam ship services to Australia and the work of Caroline Chisholm. In 1852 he achieved the carriage of a motion recommending that £10,000 should be applied to supporting Chisholm's work. He travelled to England in 1853–1854.