Dharamshala is governed by the Dharamshala Municipal Corporation, established in 2015 when it was upgraded from a Municipal Council. The city is divided into several wards, each electing a councilor, with a Mayor leading the local body.
At the state level, Dharamshala is a highly significant political center. As the winter capital of Himachal Pradesh, the state legislative assembly (Vidhan Sabha) convenes at the Tapovan complex in the Sidhbari neighborhood during the winter session. Additionally, the city is globally unique as the seat of the Central Tibetan Administration (CTA), which functions as the government-in-exile for the Tibetan diaspora, complete with its own parliament, courts, and ministries located in the Gangchen Kyishong area.

