Ismail's immaculately dressed elder brother Suleiman met him on his arrival, and quickly briefed him on “the controversy over the Malayan Union”. What immediately struck Ismail after being six years in Australia was how “political feeling engulfed Malaya as a fire engulfs a forest on a hot dry day”.

Ismail's family was deeply involved in the resistance against the Malayan Union that the British, after the fall of Imperial Japan, were trying to impose on the whole peninsula. After the Sultan of Johor signed the MacMichael Agreement, a treaty with the British accepting the Malayan Union idea, seven men, led by Abdul Rahman Yassin and including his eldest son Suleiman as well as son-in-law Awang Hassan, issued a pamphlet criticizing the move. These men, all government servants, were consequently suspended for six months.

As many Malays understood it, the Malayan Union aimed to abolish the sultanates and the special position of the Malays. The opposition to this was strongest in the Unfederated Malay States, especially Johor, where the elite was also most active. At a meeting of forty-one Malay associations held in March 1946 in Kuala Lumpur, the United Malays National Organization (UMNO) was born. UMNO's opposition to the Malayan Union proved highly successful, and the plan in effect never got off the ground, and was instead replaced on 1 February 1948 by the Federation of Malaya Agreement.

This later polity allowed for all seats in the federal and state legislature to be filled by nominees. Onn Ja'afar, the Mentri Besar of Johor and the founder of UMNO, offered Ismail a state seat, which he accepted. One of the first things Ismail did as Johor state councillor was to demand that his opposition to the establishment of the federation itself be duly recorded. He considered the federation illegal, especially with regard to the Johor constitution. Onn Ja'afar also offered Ismail a position in the Federal Legislative Council but only on condition that the latter joined UMNO. Ismail refused, telling Onn Ja'afar that he would give up his medical practice to go into politics only if the party was fighting for independence, which it was not doing. Despite his stand, Ismail did harbour respect for UMNO's official founder.