He started politics to end the 104-year-rule of the Rana Dynasty. During the political movement of 1950 to overthrow the Rana autocracy, initiated by the Bairgania Conference of the Nepali Congress on 26–27 September 1950 (Ashvin 10-11, 2007 BS), he was in charge of armed group Congress Mukti Sena fighting in Gorkha district. This armed struggle was initiated by the Nepali Congress, of which he was founding member. The armed revolution by the Nepali Congress was supported by King Tribhuvan, who was in exile, and by Indian and Burmese socialists. The armed revolution ultimately brought an end to the 104-year-rule of the Rana Dynasty on February 18, 1951 (Falgun 7, 2007 BS). This day is celebrated as Democracy Day and is a public holiday in Nepal.

After the first parliamentary election of 1959, at the age of 36, he became Speaker of lower house of parliament, though he was not an elected member. After the coup of 1960, Bhattarai was held without trial for eight years at the Sundarijal Military Detention Camp.

Bhattarai was nominated as the officiating President of the Nepali Congress on February 12, 1976 (Falgun 1, 2025 BS) by then party supremo Jananayak BP Koirala. He held this post for more than 25 years, during which time he was a key figure in Nepal's democratic movement. He was elected President of the Nepali Congress by the Eighth National Conference of the Nepali Congress, held in January 1992 (Falgun 2049 B S).

Bhattarai transformed the country from an absolute monarchy to a multi-party democracy without any major problems. He was prime minister when the constitution (1990) of Nepal was promulgated and successfully held the first multi-party election in 30 years. He was a popular leader but lost the election by a very narrow margin.

He again served as Prime Minister from May 1999 to March 2000. He also held the portfolio of foreign ministry from 1990 to 1991 and briefly during 1999 while he was prime minister. He was a founding member and former President of the Nepali Congress Party.

Until recently, both factions of the Nepali Congress, the Nepali Congress led by Girija Prasad Koirala and the Nepali Congress (Democratic) led by Sher Bahadur Deuba claimed Bhattarai on their side though his sympathy was more with Deuba from the beginning. Both congress parties elected him as Maha Samiti Member (General Convention Member) from Lalitpur District. On September 26, 2007 Bhattarai declared that he broke relations with the Nepali Congress; the day after the two factions had reunited. Bhattarai's decision was motivated by the move towards republicanism by the unified Nepali Congress.

Bhattarai died at Norvic International Hospital, Kathmandu on 4 March 2011. He was the last surviving founding leader of Nepali Congress. The hospital reported that he died at 11:26 pm. Bhattarai had been in critical care unit at the Hospital for three weeks. He was suffering from chronic bronchitis, chronic renal failure and congestive heart failure and died after having recently said that he would live to be one hundred years old.