Thompson starred in and wrote her own highly enjoyable 1988 BBC comedy-variety TV series, "Thompson" (on which Branagh made appearances), but it was her strong performance as the forthright heroine of the Merchant-Ivory production "Howards End" (1992) that catapulted her to stardom. More than holding her own against several strong actors (Anthony Hopkins, Vanessa Redgrave, Helena Bonham Carter), Thompson received a Best Actress Oscar. The following year, she earned dual Academy Award nominations as Best Actress for her turn as a housekeeper in love with a repressed butler (Hopkins) in another Merchant-Ivory adaptation, "The Remains of the Day" and a Best Supporting Actress nod for her no-nonsense barrister representing a youth accused of involvement in an IRA bombing (Daniel Day-Lewis) in "In the Name of the Father". She attempted a rare comic lead opposite Arnold Schwarzenegger and Danny De Vito in "Junior" (1994) but the material was sub par. Thompson followed with back-to-back period dramas in 1995. "Carrington" cast her in the title role of the Bloomsbury painter who had a long platonic relationship with writer Lytton Strachey. "Sense and Sensibility" was a dream project for the actress. She had long talked of penning the screenplay and the results, directed by Ang Lee, proved sparkling. One of the year's best films, "Sense and Sensibility" earned Thompson a Best Actress Academy Award nomination and numerous accolades for her witty script, including several critics awards and an Oscar.

Once divorced from Branagh, Thompson spoofed her image on a memorable episode of the ABC sitcom "Ellen" in 1997. Playing a lesbian British actress named 'Emma Thompson', she decided she would disclose her homosexuality at an awards banquet. The laughs came when she revealed she wasn't really British, but from America's heartland and had only acquired the accent from "watching Julie Andrews' films". A more masculine Thompson, her brown hair shorn and wearing shapeless clothes co-starred in Alan Rickman's directorial debut, "The Winter Guest" (1997). While she had appeared in films with her mother, actress Phyllida Law, (e.g., "Peter's Friends" 1992), "The Winter Guest" marked the first time their feature characters mirrored their off-screen lives. (They had appeared as mother and daughter in the 1994 BBC drama "The Blue Boy"). Thompson's performance as a photographer grieving the death of her husband and coping with her mother's interference was a strong one and allowed her to display aspects of her talents that had not been seen onscreen before. Mike Nichols then tapped her for the role of the ambitious wife of a womanizing presidential candidate in the critically-praised "Primary Colors" (1998). Reuniting with Rickman, she played an FBI agent to his detective in the thriller "The Judas Kiss" (also 1998).

After time out for motherhood and a chance to concentrate on her writing, Thompson made a triumphant return to acting playing a rigid college professor stricken with cancer in the HBO adaptation of "Wit" (2001). Additionally, she collaborated with director Mike Nichols on the script, based on the Pulitzer-winning play, earning Emmy nominations for both. Her next on-screen appearance was as part of the large Brit-centric ensemble of writer-director Richard Curtis' multi-story romantic comedy "Love Actually" (2003), playing the sister of the British Prime Minister (Hugh Grant) whose husband (Alan Rickman) contemplates straying. The actress earned enormous praise for her role in the ensemble of the acclaimed HBO mini-series "Angels In America" (2003), playing the multiple roles of The Angel of America, Nurse Emily and The Homeless Woman--she was ultimately nominated for a Screen Actors Guild Award for Outstanding Performance by a Female Actor in a Television Movie or Miniseries. Thompson also enjoyed an amusing, if all-too-brief, turn as the prescient but preoccupied Professor Sybil Trelawney in "Harry Potter and the Prisoner of Azkaban" (2004).

Balancing both work and domestic duties with equal aplomb, Thompson returned to the big screen in “Nanny McPhee” (2005), a children’s fantasy she adapted from Christianna Brand’s “Nurse Matilda” book series. Thompson starred as a snaggletoothed nanny with magical powers who arrives at the stately home of the Brown family where the recently widowed Mr. Brown (Colin Firth) has had problems disciplining his seven troublemaking children. After driving away the previous seventeen nannies in record time, the rambunctious scamps seek to do the same with Nanny McPhee only to discover that better they behave, the more she changes physically, creating questions about the mysterious stranger they and their father have grown to love. “Nanny McPhee” received strong praise from critics, particularly in regards to Thompson’s clever and appealing script, but the film did middling business at the box office. Meanwhile, Thompson was set to be seen in “Stranger Than Fiction” (2006), a slapstick comedy starring Will Ferrell as an IRS auditor whose life is interrupted by the sound of a personal narrator who knows his every thought and feeling, including when and where he will die.