In 1993, he was involved in secret talks with Israel which eventually culminated in the Oslo Accords of 1993. For his role in these talks, he was given the position of security chief of the Preventive Security Service (the police force of the newly created Palestinian Authority), enjoying widespread popular support. In this role, he continued to negotiate in several subsequent talks, such as the Camp David 2000 Summit.
His support waned when he took some unpopular actions during the Second Intifada, cracking down on rioters and militants and helping to negotiate ceasefires. Dahlan took these actions on the orders of Yasir Arafat, who after initially resisting calls by the United States to act to prevent violence, finally ordered his security forces to prevent further violence. This was seen as a critical step in the resumption of a last-ditch effort at negotiations on permanent status issues with the Israelis and Americans.
In 2001 he upset Arafat by beginning to call for reform in the Palestinian National Authority and expressing dissatisfaction with a lack of coherent policy.
In 2002, he resigned his post as head of the Preventive Security in Gaza in the hope of becoming the Interior Minister; this did not occur, but he was offered a post as security adviser. He did not take this step.
In April 2003, he was appointed the Palestinian Minister of State for Security by Mahmoud Abbas, despite the objection of Arafat. By September he had been ousted when Abbas resigned as Prime Minister, and was replaced by first Hakam Balawi (Oct 2003-Feb 2005) and then Nasser Youssef (Feb 2005-March 2006).
He repeatedly tried to campaign on a reform and anti-corruption ticket and tried to profile himself as an outspoken critic of Yasser Arafat, although many observers dispute his personal integrity. Nevertheless Dahlan and his followers in internal Fatah elections won over most of the Fatah sections in Gaza.
He is known to have approved of harming Israeli civilians in retaliation to any harm inflicted by the Israeli armed forces upon Palestinian civilians: "Whoever harms [Palestinian] civilians must expect similar responses.
Jibril Rajoub, with whom he cultivated a deep and personal rivalry, claimed for example in 2003 that everybody knew Dahlan was an Israeli agent. There is, though, criticism over his good relationship with Arafat's long-time financial adviser Muhammad Rashid and Dahlan's own London-based business. There is a general criticism in the Palestinian public about PA leaders allegedly having enriched themselves through corruption.
Others claim that he, for the sake of deterring political rivals and counterweighting the numerous armed militias, maintained in 2003 and 2004 a private army in the Gaza Strip which was trained and equipped by British and American services.
Dahlan also was under criticism regarding his role in Gaza turmoil, to which he contributed his share, especially in exchanging hostilities with Gazan rival Ghazi Jabali. In 2003, gunmen stormed and raided the offices of the latter's General Security organization (and reportedly went so far as to dunk his head into a toilet several times); they were said to be followers of Dahlan's ally Rashid Abu Shbak, head of the Preventive Security Service organization (Note that although Dahlan doesn't head this organization any more, he is still widely believed to have great influence on its leadership).
In 2004, Dahlan is assumed to have been the driving force behind week-long unrests in Gaza following the appointment of Yasser Arafat's nephew Mousa Arafat, widely accused of corruption, as head of Gaza police forces. This appointment was considered by some a deliberate step to weaken Dahlan's position before the Israeli disengagement from the Gaza strip and sparked massive protests.
Dahlan is currently Palestinian Minister for Civil Affairs and was in charge of coordinating some of the details of the Israeli withdrawal from Gaza with his counterpart, Israeli Minister of Defense Shaul Mofaz.
Recently Dahlan's allies, namely Rashid Abu Shbak, seem to be involved in silencing Palestinian critics of the growing lawlessness in Gaza and the passive role of the security services therein. Prof. Riad al-Agha, president of the Gaza-based National Institute of Strategic Studies, was arrested after publicly (on Palestinian TV) criticizing the Preventive Security organization for not obeying orders from the PA Interior Ministry (held by veteran Nasser Yussef), but rather acting on commands from other high ranking PA elements (an allusion to Dahlan). Al-Agha was released only after publicly withdrawing this criticism. Source
On January 26, 2006, Dahlan was narrowly elected to the Palestinian Legislative Council in the Palestinian legislative election of 2006 as a representative for Khan Younis. In January 2007, Dahlan took a tough stance against Hamas.
In March 2007, despite objections from Hamas, Dahlan was appointed by Palestinian President Mahmoud Abbas to lead the newly re-established Palestinian National Security Council, which is intended to oversee all security services in the Palestinian territories.
In July 2007, Dahlan resigned from his post as national security adviser. The resignation was little more than a formality, since Mahmoud Abbas had issued a decree dissolving his national security council immediately after the Hamas takeover of Gaza in mid-June 2007. Dahlan has been blamed by many in Fatah for the rapid collapse of their forces in Gaza in the face of a Hamas offensive that lasted less than a week. During the fighting Dahlan's house on the coast of Gaza, which many locals had seen as a sign of corruption by Fatah, was seized by Hamas militants and subsequently demolished. He and most of the other senior security commanders of the Fatah-dominated Palestinian Authority security forces were not in Gaza during the fighting, leading to charges that their men had been abandoned in the field.