Reid, whose family had emigrated to Melbourne in 1852, served in the colonial Treasury (1864–78) and began a law practice in Sydney in 1879. Elected to the New South Wales Parliament in 1880, he became minister of public instruction (1883–84) and introduced pioneer bills for technical education and evening university lectures.

Becoming premier in 1894, Reid implemented close financial accounting and removed the civil service from political control. After equivocating on the issue, he helped win New South Wales's approval of Australian federation, established in 1901.

Reid led the pro-free traders' opposition in the first federal Parliament (1901–04). In April 1904 he combined with the Australian Labor Party to defeat the Liberal ministry of Alfred Deakin, and then in August he joined with Deakin to defeat Labor and to form a coalition ministry (1904–05). He led the opposition in Parliament from 1905 until his retirement from Australian politics in 1908. He was knighted in 1909 and served as high commissioner in London (1910–16) and as a member of the British Parliament (1916–18). His autobiography, My Reminiscences, was published in 1917.