In 1976 Yadin formed the Democratic Movement for Change, commonly known by its Hebrew acronym Dash, together with Professor Amnon Rubinstein, Shmuel Tamir, Meir Amit, Meir Zorea, and many other prominent public figures. The new party seemed to be an ideal solution for many Israelis who were fed up with alleged corruption in the Labor Alignment (the dominant party in Israel from its founding and up to that time), which included the Yadlin affair, the suicide of Housing Minister Avraham Ofer, and Leah Rabin's illegal dollar-denominated account in the United States. Furthermore, Dash was a response to the increasing sense of frustration and despair in the aftermath of the 1973 war, and the social and political developments that followed in its wake. Many people regarded Yadin, a warrior and a scholar, as the quintessential prototype of the ideal Israeli, untainted by corruption, who could lead the country on a new path.
In the 1977 elections, which transformed the Israeli political landscape, the new party did remarkably well for its first attempt to enter the Knesset, winning 15 of the 120 seats. As a result of the election, Likud party leader Menachem Begin was initially able to form a coalition without Dash (or parties to its left), significantly lowering the bargaining power of Dash. Dash joined the coalition after a few months. As the new Deputy Prime Minister, Yadin played a pivotal role in many events that took place, particularly the contacts with Egypt, which eventually led to the signing of the Camp David Accords and the peace treaty between Israel and its neighbor. Nevertheless, Dash itself proved to be a failure, and the party broke up into numerous splinter factions; Yadin joined the Democratic Movement, but it too split up and he sat as an independent MK for the remainder of his term. During a cabinet meeting, May 1981, while still Deputy Prime Minister, he accused Chief of Staff Rafael Eitan of "lying to the government" and told Prime Minister Begin "You have lost control of the defence establishment." He retired from politics in 1981.
Yadin was married to Carmela (née Ruppin), who worked with him throughout his career in translating and editing his books and with whom he had two daughters, Orly and Littal. He died in 1984 and was buried in the military cemetery in Mount Herzl in Jerusalem. The Israeli actor Yossi Yadin was his brother.
Party affiliation: Haganah