Persson joined the Swedish Social Democratic Youth League in the mid-1960s, when he was 15, and he remained active in the governance of the organization until the mid-1970s. From 1969 to 1971 he studied at the University College of Örebro. He became active in local politics, particularly in the county of Södermanland (Sörmland) and, in it, the city of Katrineholm. In Södermanland he headed the county's educational board and the district organization of the SAP, and in Katrineholm he served as chairman of the city educational authority and as a city councillor. Throughout his career Persson also served as an officer for a number of organizations, including the Workers' Educational Association of Sörmland, the Nordic Museum, the Sörmland Cooperative Consumers' Association, the Swedish Cooperative Union and Wholesale Society, and the National Federation of Labour Movement Community Centres.

Persson served in the Swedish Riksdag (parliament) during 1979–84. He returned to the Riksdag in 1991. In parliament he was a member of committees dealing with agriculture, industry, and finance. In 1989–91 Persson worked in the education ministry, where he was responsible for educational and cultural affairs, and in 1994–96 he was minister of finance. From 1993 to 1996 he was a member of the executive committee of the SAP.

In 1996, on the retirement of Ingvar Carlsson, Persson became the leader of the SAP and Sweden's prime minister in a minority government. As head of government, he continued the economic policies of his predecessor; he worked to reduce budget deficits while also attempting to bring down unemployment rates. In elections held on Sept. 20, 1998, however, the SAP won little more than a third of the votes cast—its worst showing in 70 years. This was attributed largely to protest against high unemployment, cuts that had been made in the country's extensive welfare system, and membership in the European Union (EU). Nonetheless, the SAP under Persson was able to form a coalition, and the new government continued policies of economic reform. In addition, Sweden assumed the rotating presidency of the EU for the first six months of 2001, with Persson emphasizing such issues as expanded membership, protection of the environment, and programs to reduce unemployment. In 2002 the SAP again won a plurality of votes in legislative elections, and Persson began his third term as prime minister. Persson pushed for Sweden to adopt the euro, the currency of the EU, but Swedish voters rejected the proposal in a 2003 referendum.

Persson served as prime minister until October 2006, after a coalition of centrist and conservative parties narrowly defeated the SAP in September elections. The leader of the centre-right coalition, Fredrik Reinfeldt, replaced Persson as prime minister.