From 1514 to 1529 Wolsey virtually controlled domestic and foreign policy for the young Henry VIII. In 1518 he engineered a treaty of universal peace embracing all the principal European states, which was meant to establish England as the mediator of European politics. This was followed by a dramatic display of amity between England and France on the Field of the Cloth of Gold (1520). After attempting (1521) unsuccessfully to avert war between France and the Holy Roman Empire, he allied England with Emperor Charles V in 1522, but after Charles's defeat of the French at Pavia (1525), Wolsey again inclined his favor to France. His attempts to secure for England the role of arbiter in the Hapsburg-Valois rivalry finally failed when England became diplomatically isolated in 1529. The cardinal was twice a candidate for the papacy, but the thesis that his diplomacy was shaped largely by his ambition to become pope has been seriously questioned.

Internally, Wolsey centralized the administration and extended the jurisdiction of the conciliar courts, particularly the Star Chamber. However, his policy of raising money for England's wars by forced loans aroused considerable resentment. So too did his blatant ecclesiastical pluralism, enormous wealth, and lavish living. Wolsey's enemies at court, jealous of his power over the king, used the divorce of Katharine of Aragón as a means to bring about his ruin. At Henry's urging, he procured from the pope permission to try the issue in England. He presided at the trial with Cardinal Campeggio, who delayed and temporized and finally adjourned the case to Rome. He incurred Henry's anger for this failure to secure a quick and favorable decision and the enmity of Anne Boleyn for urging a French marriage on the king.

In Oct., 1529, he lost the chancellorship and all his honors and privileges except the archbishopric of York. He turned to his diocese, which he had never previously visited, and ruled it well for a few months. However, in Nov., 1530, he was arrested on false charges of treason and died at Leicester on his way to London.