Dahanayake contested the March 1960 general election from the Sri Lanka Freedom Party from Deniyaya, but came third. He was successful in the July 1960 general election and was elected to parliament. He was again elected to parliament in the 1970 general election. He was the President of the Morawaka Cooperative Union, which manufactured crayons under the brand CoopCrayon during the 1970s. He was wounded in April 1971, during the 1971 JVP insurrection when he and Major Wettasinghe attempted to lead an army expedition into rebel held areas outside Matara.