Between 1977 and 1989 he was actively involved in several operations conducted by ETApm, a terrorist organization seeking to establish a Marxist-Leninist Basque state. On 21 February 1989 he was found guilty of kidnapping and imprisoned during four years . He decided to change the approach through which he would effect the change he desired, and on 27 September 1995, he entered politics, becoming an MP for the independentist party Herri Batasuna. In November 1997 the Spanish Supreme Court sentenced several senior members of Herri Batasuna to seven years in jail, due to alleged involvement with ETA, and in the resulting power vacuum, Joseba Permach and Otegi were chosen to fill the new provisional leadership of Herri Batasuna.
On 12 September 1998, Otegi played a key role in the formulation of the "Declaration of Estella/Lizarra", which proposed to solve the Basque conflict by beginning a process of dialogue with other nationalist parties, most prominently, the Partido Nacionalista Vasco (PNV). This marked a profound change in Otegi's style, and appeared to show him renouncing his former violent ways. In the Basque elections of October 25 1998, he was a candidate for the party Euskal Herritarrok, which had replaced Herri Batasuna, representing the region of Gipuzkoa. The Lizarra-Garazi agreements, which resulted in an ETA truce at that time, helped give Euskal Herritarrok their best results in ten years, and they became the third-largest political party in Basque Country and the adjacent region of Navarra. This peak of popularity in terms of votes was reversed as ETA broke the truce with new assassinations. According to figures published by Spain's Association for Victims of Terrorism (AVT), as of November 2007 ETA has murdered 218 people (not counting those killed during street violence associated with pro-ETA groups).
In August 2000, a senior court in Basque Country accused Arnaldo Otegi of "apology of terrorism", after that he had cried out-loud "¡Gora Euskadi ta Askatasuna!" in France. However, the Supreme Court (Tribunal Supremo) closed the case, stating that crimes of apology of terrorism could not be pursued if committed abroad. This precedent was then called forth by the Audiencia Nacional concerning the Carmelo Soria case .
In May 2005 Arnaldo Otegi was put on trial for membership in the terrorist group ETA, and posted bail for €400,000, money which, it has been alleged, was raised by ETA by a series of extortions. Arnaldo Otegi's arrest came only three days after ETA, which is closely linked to Batasuna, called off its ceasefire. It also follows a Supreme Court ruling confirming a 15-month prison sentence against Otegi for "apology of terrorism ," or "glorifying terrorism," committed in 2003. He appealed the conviction, but a panel of judges unanimously rejected the appeal. Furthermore, Otegi was sentenced to a year of prison in November 2005, on allegations of slander made against King Juan Carlos during a 2003 news conference. Otegi had then stated that the King was the "chief of the Spanish army, that's to say, the person responsible for the torturers, who favour torture and impose his monarchic regime on our people through torture and violence" .
As of September 2008, he has four open trials against him for ETA-related charges