Callbeck returned to politics in 1988 when she was elected to the federal House of Commons as an MP for the Liberal Party of Canada. In January 1993 she returned to provincial poltics to successfully run for the leadership of the Prince Edward Island Liberal Party. Under her leadership the Liberals won the provincial election in March 1993 becoming the first female leader of a political party in Canada to lead her party to victory in a general election.

Her government proved to be unpopular, however, and Callbeck resigned in October 1996 after only three and a half years as PEI's Premier. In September 1997 she was appointed to the Senate.