Hodgson was the warden of Haliburton County prior to entering provincial politics. Hodgson was elected to the Ontario legislature in a 1994 by-election, defeating Liberal candidate Sharon McCrae by fewer than 2,000 votes in the rural riding of Victoria—Haliburton. The by-election was extremely bitter, and there were many accusations that Hodgson's team appealed to homophobic prejudice in the region to put their candidate over the top. At the time of the by-election, the Liberal Party supported the NDP government's plans to provide increased social benefits for same-sex couples in Bill 167. They reversed their position after Hodgson's victory, amid fears that the issue had cost them rural support. This reversal in policy would later cost the party, however: after targeting the Liberal Party's purported lack of credibility, the Tories won a majority government in the provincial election of 1995, and Hodgson was re-elected over McCrae by almost 20,000 votes. On June 26, 1995, he was named Minister of Natural Resources, Development and Mines in Mike Harris's government. On October 10, 1997, Hodgson was named Minister of Northern Development and Mines, Chair of the Management Board of Cabinet and Deputy Government House Leader. He also served as Minister of Municipal Affairs and Housing. Hodgson defeated McCrae for a third time in the 1999 provincial election, this time in the redistributed riding of Haliburton—Victoria—Brock. He retained his position as Chair of the Management Board in the new parliament, and was also named Commissioner of the Board of Internal Economy on July 27, 1999. After a cabinet shuffle on February 8, 2001, he was named Minister of Municipal Affairs and Housing. As Minister of Natural Resources Hodgson launched the Lands for Life initiative, which saw the largest increase in parks and protected space in the history of the province. As Municipal Affairs Minister he rewrote the Municipal Act for the first time since the passage of the Baldwin Act in the late 19th century, placed protective status on the Oak Ridges Moraine and began a smart growth program for the entire province, an initiative that was downsized to include only the GTA in the successive Liberal government and renamed Places to Grow. When Harris resigned as Premier in 2002, many expected Hodgson to enter the race to replace him. Instead, he endorsed Ernie Eves, the victorious candidate. He retained the Municipal Affairs and Housing portfolio in the Eves cabinet, but unexpectedly stepped down on January 13, 2003, announcing his decision to retire from politics. He did not run in the 2003 election. In 2004, he supported John Tory's successful bid to replace Eves as party leader.
Shortly after assuming office, Hodgson was involved in a cabinet discussion with Harris and members of the Ontario Provincial Police concerning a standoff with native protesters at Ipperwash Provincial Park. The police cleared the park by force on September 6, 1995, and in the process killed an unarmed protester named Dudley George. The Ipperwash Inquiry into the Ipperwash shooting was established by the Liberal government of Dalton McGuinty in 2004. In late 2005, former deputy Solicitor-General Elaine Todres testified that she heard Hodgson say, "Get the fucking Indians out of my park" at a lunch-hour meeting on the day of Dudley George's shooting. Former Attorney GeneralCharles Harnick had previously testified that he heard Premier Harris say "I want the fucking Indians out of the park" at the same meeting. Harris and Hodgson both denied the allegations when they took the stand.