The Islands are self-governing in free association with New Zealand and are fully responsible for internal affairs. New Zealand retains some responsibility for external affairs, in consultation with the Cook Islands.

 In recent years, the Cook Islands have taken on more of its own external affairs; as of 2005, it has diplomatic relations in its own name with eighteen other countries. Executive power is exercised by the government, while legislative power is vested in both the government and the islands' parliament. The judiciary is independent of the executive and the legislatures.

The Constitution of the Cook Islands took effect on August 4, 1965, when the Cook Islands became a self-governing territory in free association with New Zealand. The anniversary of these events in 1965 is commemorated annually on Constitution Day, with week long activities known as Te Maevea Nui Celebrations locally.

The monarch is hereditary; her representative is appointed by the monarch on the recommendation of the Cook Islands Government. The cabinet is chosen by the prime minister and collectively responsible to Parliament.

Ten years of rule by the Cook Islands Party (CIP) came to an end 18 November 1999 with the resignation of Prime Minister Joe Williams. Williams had led a minority government since October 1999 when the New Alliance Party (NAP) left the government coalition and joined the main opposition Democratic Party (DAP).

 On 18 November 1999, DAP leader Dr. Terepai Maoate was sworn in as prime minister. He was succeeded by his co-partisan Robert Woonton. When Dr Woonton lost his seat in the 2004 elections, Jim Marurai took over. In the 2010 elections, the CIP regained power and Henry Puna was sworn in as prime minister on 30 November 2010.

Following uncertainty about the ability of the government to maintain its majority, the Queen's representative dissolved parliament mid-way through its term and a 'snap' election was held on 26 September 2006. Jim Marurai's Democratic Party retained the Treasury benches with an increased majority.

The New Zealand High Commissioner is appointed by the New Zealand Government.

The Parliament of the Cook Islands has 24 members, elected for a five-year term in single-seat constituencies. There is also a House of Ariki, composed of chiefs, which has a purely advisory role. The Koutu Nui is a similar organization consisting of sub-chiefs. It was established by an amendment in 1972 of the 1966 House of Ariki Act. The current President is Te Tika Mataiapo Dorice Reid.

On June 13, 2008, a small majority of members of the House of Ariki attempted a coup, claiming to dissolve the elected government and to take control of the country's leadership. "Basically we are dissolving the leadership, the prime minister and the deputy prime minister and the ministers," chief Makea Vakatini Joseph Ariki explained. The Cook Islands Herald suggested that the ariki were attempting thereby to regain some of their traditional prestige or mana.

 Prime Minister Jim Marurai described the take-over move as "ill-founded and nonsensical". By June 23, the situation appeared to have normalised, with members of the House of Ariki accepting to return to their regular duties.