Underwood's first professionally-released film was the stop-action "Recorded Live" (1977), made with screenwriters/producers Brent Maddock and S.S. Wilson, who became long-time collaborators. He served as assistant director on the horror film "Tourist Trap" (1979) and associate-produced another in that genre, "Crawlspace" (1986). Moving to TV, he directed the highly acclaimed animated children's special "The Mouse and the Motorcycle" (for which he won a Peabody Award in 1986) and its sequel "Runaway Ralph" (1988).
Underwood returned to features with "Tremors" (1990), a stylish comic homage to the horror films of the 1950s; the film was well received by critics, but couldn't find a market at the box-office. But his luck changed in a big way when he directed "City Slickers" (1991), an adventure comedy starring Billy Crystal and a score of baby-boomers trying to figure out life, love and cattle. The film grossed over $200 million worldwide and remains his biggest box-office hit. That year, Underwood formed Stampede Entertainment with Maddock, Wilson and producer Nancy Roberts.
Underwood continued in the "relationship comedy" vein with "Heart and Souls" (1993), a ghost story starring Robert Downey Jr and Charles Grodin. His next outing, "Speechless" (1994), starred Geena Davis and Michael Keaton as political speechwriters who fall in love before discovering they worked for rival candidates; it met with critical and box-office indifference.