Foxley has taught at various universities including the University of Sussex in 1973, Oxford University in 1975, Massachusetts Institute of Technology in 1978, University of California, Berkeley in 1981, University of California, San Diego in 1985 and the University of Notre Dame. He has written thirteen books on economics and the problems of democracy.

Foxley was appointed to the first Chilean cabinet after the restoration of democracy by Patricio Aylwin. He served as Minister of Finance from 1990 to 1994 and is regarded as one of the architects of the strong economic growth of the period. As Finance Minister he was also a governor of the Inter-American Development Bank and the World Bank. Following his period as Finance Minister Foxley was elected leader of the Christian Democrat Party in 1994, serving until 1996.

In 1998 Foxley was elected a member of the Senate of Chile for Santiago East. In the Senate he was the Chairman of the Finance Committee for four years until he stood down from the Senate in 2006. During his period in the Senate he was seen as a possible Presidential candidate but backed the candidacy of Michelle Bachelet in the Presidential election. Bachelet appointed him as Foreign Minister in March 2006 following her victory in the election. In March 2009 Foxley resigned as Foreign Minister for personal reasons and to pursue other interests. Today he is a member of Washington D.C. based think tank, the Inter-American Dialogue.