Tamir was one of the founders of Peace Now in 1978, and between 1980 and 1985, she was an activist for Ratz. From 1998 until 1999, she was chairwoman of the Israeli Association for Civil Rights. From 1995, she became active in the Labour Party. Although Tamir failed to win election to the Knesset in the 1999 election, she was appointed Minister of Immigrant Absorption by Ehud Barak. She was elected to the Knesset in the following 2003 election, and served on the finance, constitutional, law and order, public input, and culture and sport committees. She also served on the investigatory parliamentary committee into government corruption.
She was elected to the Knesset again in the 2006 elections, and as of 4 May 2006, is the Education Minister in Ehud Olmert's Kadima-led coalition government. Tamir also served as acting Science, Culture and Sport minister following Ophir Pines-Paz's resignation in November 2006 until March 2007 when Raleb Majadele was appointed. Placed ninth on the party's list, she retained her seat in the 2009 elections. However, she resigned her seat in 2010, and was replaced by Majadele.
Tamir has been a controversial figure in Israel. As Minister of Education, she approved a history textbook for Arab children, wherein Israel's War of Independence is described as the nakba – the disaster. This led the opposition leaders to demand her dismissal, while Member of Knesset Ronit Tirosh (Kadima), a former director general of the Education Ministry, said the "wretched" decision "is not justified from a pedagogic standpoint and is not a matter for political intervention." Tamir defended her act as a way of giving "expression to [the Arab's] feelings as well." On 11 August 2008 Tamir announced plans to remove Ze'ev Jabotinsky's work from the national education curriculum.