Carstairs became leader of the Manitoba Liberal Party in 1984, at a time when the party held no seats in the legislature. She was defeated in a 1984 by-election in Fort Garry, but was elected for River Heights in the 1986 provincial election, defeating incumbent ToryWarren Steen. For the next two years, she was the only Liberal in the legislature. Carstairs led the Liberal Party to a dramatic resurgence in the 1988 provincial election, which saw the election of a Progressive Conservativeminority government under Gary Filmon and the reduction of the New Democratic Party of Manitoba from government to third party status. Carstairs's Liberals won 20 of 57 seats for their best showing since 1953, largely by drawing many centre-left voters from the NDP. Carstairs became leader of the opposition, the first woman to hold such a position in any Canadian legislature. Having led the party out of almost 20 years in the political wilderness, it initially seemed that Carstairs had a strong opportunity to lead the Liberals to victory in the following election. Had she done so, she would have become the first woman elected in her own right as a provincial premier in Canada. The 1990 election, however, saw the Tories returned with a majority government and a resurgent NDP under Gary Doer regain official opposition status. The Liberals were reduced to only seven seats. Many Liberals felt Carstairs had squandered their best chance in three decades to form government. A strong opponent of the Meech Lake Accords, Carstairs remained party leader and, in 1992, campaigned for the "No" side on the Charlottetown Accord, with financial assistance from former party leader Israel Asper. Her efforts were opposed by others in the Liberal Party, and she frequently argued with Lloyd Axworthy on constitutional matters. Carstairs resigned as party leader in 1993. The party has continued to decline since her departure, and has never come anywhere near as close to winning government as it did in 1988. In 1993, Carstairs published an autobiography entitled Not One of the Boys.
In October 2011, Carstairs announced she was resigning from the Senate, six years earlier than required, in order to return to private life. In retirement, she and her husband intended to remain in Ottawa to be close to their children. Carstairs became chairwoman of the board for a network centre of excellence on caring for the frail elderly, pending the approval of a grant from the federal government. In 2015, the RCMP investigated her expenses that she had submitted to the Senate but did not lay charges.
