He was selected by the Habar Gidir clan to succeed his father when he died. He relinquished the disputed title of President by signing the Cairo Declaration, on December 22, 1997, in Cairo, Egypt following a peace process between Salbalar administration and Soodare Group. Farrah is seen by the West as a chance of improvement for the relationships between them and Somalia.
On September 1, 1996, Mr. Aidid met with UN representatives for the first time, to deal with issues left over as legacies of his father's administration. Issues addressed at the meeting which needed to be resolved before the return of UN workers and the resumption of UN assistance included the following concerns:
Hussein Aidid refused to recognize the newly forming Djibouti-backed Mogadishu-based Transitional Federal Government (TFG), accusing it of "harboring militant Islamist sympathizers." Instead he formed the rival Somali Reconciliation and Restoration Council (SRRC) in early 2001.
At some time during late 2001, he advised US President George W. Bush that a money transfer and telecommunications company, Al Barakaat, "had ties to terrorists and that there were terrorists in Somalia sympathetic to Osama bin Laden." He also "warned that militant Islamist Pakistani proselytizers were active in Mogadishu and other Somali cities and that they have strong links to Al-Itihaad al-Islamiya."
In July 2003, at the Somali National Reconciliation Conference, the SRRC and TNG leadership reached key compromises: "The TNG accepted the number of parliamentarians proposed by the SRRC while the latter approved the inclusion of politicians as requested by the TNG."
On October 25, 2005, Aidid handed over the USC/SNA's combined 3,500 landmines to non-profit Geneva Call. He and other faction leaders had agreed to stop burying land mines as a further sign of the ending of years of civil war.
On December 28, 2006, after the defeat of the Islamic Courts Union (ICU), Aidid was present when government forces entered Mogadishu. On January 2, 2007, Mr. Aidid was quoted as suggesting Somalis within Ethiopia and Somalia should share a common passport, raising concerns of whether Ethiopia had plans to annex Somalia.
On 13 May 2007, he was sacked from the position of deputy prime minister, with the reason being given that he was inactive in his duties. This followed Aidid's defection to Asmara, Eritrea, and his accusation that Ethiopia was guilty of ‘genocide’ and calling for its withdrawal.