Political life in Denmark is orderly and democratic. Political changes occur gradually through a process of consensus, and political methods and attitudes are generally moderate. Growing numbers of immigrants and refugees throughout the 1990s, and less than successful integration policies, however, have in recent years led to growing support for populist anti-immigrant sentiments in addition to several revisions of already tight immigration laws, with the latest revision taking effect July 1, 2002.

The Social Democratic Party, historically identified with a well-organized labor movement but today appealing more broadly to the middle class, held power either alone or in coalition for most of the postwar period except from 1982 to 1993. From February 1993 to November 2001, Social Democratic Party chairman Poul Nyrup Rasmussen led a series of different minority coalition governments, which all included the centrist Social Liberal Party. However, with immigration high on the November 2001 election campaign agenda, the Danish People's Party doubled its number of parliamentary seats; this was a key factor in bringing into power a new minority right-of-center coalition government led by Liberal Party chief Anders Fogh Rasmussen (no relation to Nyrup Rasmussen).

Parliamentary elections held November 13, 2007 returned the coalition to government for another term of up to four years. The coalition consists of the Liberal Party ("Venstre") and the Konservative Party, holding 64 of the 179 seats in the Folketing, and has the parliamentary support of the Danish People's Party, holding another 25 seats. The opposition Social Democrats hold 45 seats, and the Social Liberals hold 9 seats. Addressing the costs and benefits of the Denmark's comprehensive social welfare system, restraining taxes, and immigration are among the key issues on the current domestic political agenda.

Denmark's role in the European Union (EU) remains an important political issue. Denmark emerged from two referenda (June 2, 1992 and May 18, 1993) on the Maastricht Treaty on the European Union with four exemptions (or "opt-outs"): common defense, common currency, EU citizenship, and certain aspects of legal cooperation, including law enforcement. The Amsterdam Treaty was approved in a referendum May 28, 1998, by a 55% majority. Still, the electorate's fear of losing national identity in an integrated Europe and lack of confidence in long-term stability of European economies run deep. These concerns were at the forefront of the September 28, 2000 referendum on Denmark's participation in the third phase of the Economic and Monetary Union, particularly the common currency, the euro; more than 53% voted "no," and Denmark retained its "krone" currency unit. The government and the pro-EU opposition have agreed, and Denmark has received an EU green light to maintain the four opt-outs throughout the process of approving and ratifying a new EU constitutional treaty, with the ambition to eliminate several opt-outs in late 2008.

Denmark's relatively quiet and neutral role in international affairs was abruptly changed on September 30, 2005, when the Danish newspaper Jyllands-Posten printed 12 caricatures of Mohammed. Islamic law prohibits any visual portrayal of Mohammed, and Muslims viewed the caricatures as offensive. Muslims worldwide were infuriated with the Danes, beginning a boycott of Danish products and burning several Danish embassies. The Danish Government defended freedom of expression while it chastised the newspaper for inconsideration. The newspaper apologized, and the Danish Government repeatedly reiterated its support for freedom of religion, but the Islamic community still holds much animosity toward the Danes.