Gaghan segued to the big screen in 2000 with a pair of disparate films. His first produced script was "Rules of Engagement", an old-fashioned military courtroom drama that was directed by William Friedkin and based on an idea of former US Navy Secretary James Webb. Although it enjoyed some success, it was nothing next to Gaghan's second screenplay of that year. For "Traffic", helmed by Steven Soderbergh, the writer turned a six-hour 1989 British TV miniseries into an engrossing, critically acclaimed look at the seeming futility of the drug war. Drawing on his own experiences as a drug addict, the writer wove together the strands of three separate stories. "Traffic" examined how drugs were smuggled across the Mexican border and into the USA by focusing on 1) an relatively honest cop based in Tijuana, 2) the socialite wife of a drug dealer who quickly finds she has a flair for her husband's business, and 3) a jurist appointed to a government post to oversee the "war on drugs" who discovers that the battles are fought much closer to home than he thought. The complex, multi-character drama struck a chord with audiences and critics, and Gaghan was rewarded with the Academy Award for best adapted screenplay.
With the overwhelming success of "Traffic,” Gaghan was in demand and he added to his resume by stepping behind the cameras to make his feature directing debut with the thriller "Abandoned" (lensed 2001), from his script about a college student who may be involved in the disappearances of two people. He next contributed to the screenplay of the expensive historical flop "The Alamo" (2004), and he had a story credit on "Havoc" (2005), director Barbara Kopple's underwhelming Beverly Hills teens-gone-bad melodrama. Assuming the director's chair for the second time, Gaghan threw himself into the creation of "Syriana" (2005), another complicated, multi-character exploration of politically charged subject: the behind-the-scenes machinations over Middle Eastern oil. Gaghan spent an extensive period in the region researching the film, including a frightening stint in which it appeared he had been abducted but resulted in a revealing meeting with leaders of the terrorist cell Hezbollah. The result was a well-crafted, intriguing exploration of the issue through various points of view, including a burnt-out CIA agent (George Clooney) left hung out to dry by the government he served, an idealistic energy analyst (Matt Damon) who becomes obsessed with helping an oil-rich nation develop after the death of his child and a smooth, canny attorney (Jeffrey Wright) investigating the propriety of an oil deal. Though Gaghan's purpose was never to take a particular position or offer any solutions to the issue, the film's storylines were not only complex, they were occasionally murky and oblique at best and confusing at worst. However, the quality of the film was never in question, resulting nominations for Best Adapted Screenplay at the 2006 WGA Awards and 78th Annual Academy Awards.