Kilrea ran for mayor of Ottawa in the 2003 municipal election on a platform that included opposition to light rail expansion, opposition to official bilingualism, abolition of the ban on smoking in public places, and an increase of police officers. Kilrea has received quite a great deal of media attention in Ottawa from his right wing policies but drew heavy criticism from many groups including light-rail supporters and poverty activists. He finished in second place.
Kilrea also ran for the Conservative Party of Canada nomination in Ottawa South for the 2004 federal election. He lost the nomination to Alan Riddell, who was defeated in the election by Liberal candidate David McGuinty.
On August 30, 2006, Kilrea abruptly withdrew from the mayoral race and threw his support to Chiarelli. Kilrea's reasons included his lack of fundraising success, which might leave him with a significant debt. He also stated that his supporters feared that Kilrea's campaign might split the centre/right vote with Chiarelli thus aiding left-wing candidate Alex Munter's campaign   . Terry Kilrea's surprise endorsement of Chiarelli had little apparent effect; Chiarelli continued to slide in the polls and finished a distant third behind Munter and the victorious O'Brien.
On February 10, 2007, The Ottawa Citizen reported in detail claims from Kilrea that he had met with O'Brien in July 2006 (before O'Brien entered the race), and that O'Brien had offered him up to $30,000 to cover his debts and help obtaining an appointment to the National Parole Board if Kilrea would withdraw from the race and support O'Brien. Kilrea claims he considered the offer for 25 days and then met with O'Brien again and declined. According to Kilrea the money was offered to cover Kilrea's campaign expenses to date, possibly including debt incurred in the 2003 campaign.
Kilrea swore the allegations in a legal affidavit  paid for by The Ottawa Citizen on December 20, 2006. According to The Ottawa Citizen story, Kilrea subsequently took and passed a polygraph test on his conversations with O'Brien.
The Ontario Provincial Police investigated the allegations contained in the affidavit for 9 months. The investigation resulted in O'Brien being charged with two counts of influence peddling on December 10, 2007 . In the resulting trial Ontario Superior Court Justice Douglas Cunningham dismissed both charges against O'Brien on August 5, 2009.
During the trial, Kilrea denied knowledge of the fact that his common-law wife had leaked copies of his affidavit and personal e-mails to the media , but during a lengthy ruling in the trial Justice Cunningham found the “circumstances” behind the creation of the affidavit “troubling”, and noted that the affidavit and e-mails were most likely leaked by Kilrea himself . He also noted “Mr. Kilrea has proved to be a master of manipulating the media, and keeping his name in the news”, and concluded that he may be “well-meaning” — but not, “a particularly reliable witness.”
Crime and Drug issues
Before his withdrawal from the mayoral race, he planned a tough policy that would have remove all drug dealers, panhandlers and vagrants off downtown streets, particularly around the Rideau Street area where a homeless man was recently killed in an altercation.
However, his plan of removing panhandlers and vagrants wasn't greeted well by a group of homeless people that are located in an underpass tunnel beside the Rideau Centre, which was the location of the aforementioned stabbing. What created this uproar is that Kilrea mentioned to a local newspaper that there won't be panhandlers and vagrants sleeping on city streets while adding a significant number of police officers (the latter as requested by Councilor Bedard). Members that are commonly located near the underpass mentioned that they group together and are helping out each other disliked Kilrea's plan.
Kilrea mentioned that removing bus shelters on Rideau Street in front of the Rideau Centre (which Ottawa Councilor Georges Bédard planned but rejected) would not have solved the problems of drug dealing in the area.
Though, a few weeks later, Kilrea promised to help drug addicts for treatment. He planned to scrap the city's crack pipe and needle exchange program in order to save 1 million dollars.
As for the O-Train project, Kilrea had criticized its potential to create a major financial burden to Ottawa taxpayers and mentioned it may also be a failure due to a possible lack of ridership when the North-South Line expansion will be completed in 2009 from the University of Ottawa to Barrhaven. He has also criticized that the project will hinder activities on the Rideau Canal, thus a large portion of the tourism industry during the winter periods when the rail will be built. However, Kilrea praised the concept of bus rapid networks as one of the best in North America  The project was later cancelled on December 14, 2006 by City Council.
Police Chief Nomination
When Ottawa Police Chief Vince Bevan decided to retire earlier in the summer of 2006, Kilrea mentioned that it is not important for his successor to learn the French language since he is opposed to the city's bilingualism policy.
On August 30, 2006 Kilrea announced his nomination for council in Bay Ward against incumbent Alex Cullen, which he said was supportive of then front-runner Alex Munter. However, Cullen defeated Kilrea with a substantial margin.  
Plans for Seniors
While running for Bay ward, he promised to give free access to public transit for all seniors. He also promised a new recreation centre which would have included a senior's centre and a swimming pool. He was against a multi-functional Francophone center, citing that it would have been a waste of taxpayers money and also said that they should go to existing community centres.