From her childhood, Moorhouse had been fascinated with narrative techniques and had originally aspired to be a novelist or playwright. She has claimed that when she saw Nicholas Roeg's "The Man Who Fell to Earth" and Fred Schepisi's "The Devil's Playground" (both 1976), she was inspired to become a filmmaker. While attending the Australian Film, Television and Radio School, Moorhouse wrote and directed her first short film, "Pavane" (1983). Intended to be a Bergmanesque portrait of a homeless girl who accidentally stabs a real estate agent, "Pavane" was perceived as a black comedy. ("I had failed in my attempt to do something profound, but I had done something extremely, unintentionally funny" she told the NEW YORK TIMES.) After graduation from film school, Moorhouse worked for Australian TV as a script editor and writer. She wrote and directed another short film, "The Siege of Barton's Bathroom" (1986), which became the basis for a book and a 12-part TV series.

Moorhouse made her feature writing and directing debut with "Proof" (1991), a character-driven black comedy whose central figure is a distrusting, blind photographer (Hugo Weaving). A complex, multi-layered film, "Proof" examines unrequited love, male bonding (with a latent homoeroticism), misogyny, and, ultimately, trust. Martin, the photographer, is tended to by his housekeeper Celia (Genevieve Picot), who is in love with him and jealous of his growing relationship with Andy (Russell Crowe), a charming drifter who verbally describes the photographs Martin takes. Celia manipulates Andy into lying to Martin and then reveals the deception. Blessed with fine performances, a witty, inventive script and craftsmanlike direction, "Proof" won acclaim and a special jury mention in the Camera d'Or (Best First Feature) category at the 1991 Cannes Film Festival. It went on to win six Australian Film Institute Awards (the equivalent of an Oscar) including Best Feature, Best Direction and Best Screenplay.

With her producing partner Lynda House, Moorhouse produced the Australian comedy "Muriel's Wedding" (1994), written by her husband P J Hogan (whom she met when both were students at film school). An antic comedy about an overweight woman who is determined to leave her hometown of Porpoise Spit, "Muriel's Wedding" was cited as 1994's Best Feature by the Australian Film Institute.

Following the success of "Proof", Moorhouse received numerous offers to direct, but it took four years before she helmed her next feature, "How to Make an American Quilt" (1995). An ensemble drama boasting a cast of top-flight actresses (Ellen Burstyn, Winona Rider, Anne Bancroft, Jean Simmons, among others), the film, told in flashbacks that create a patchwork of the women's lives, essentially is about love and the reconciliation of the past with the present. As a sewing circle creates a wedding quilt, pivotal moments in family history are recounted. What might have been overly sentimental remained bracingly fresh. Moorhouse treated each flashback as a separate short film and utilized a wide range of styles and tones, from comic melodrama to tragedy. The film earned generally respectful reviews and a modest take at the box office. In 1997, Moorhouse helmed the disappointing screen adaptation of the Pulitzer Prize-winning novel "A Thousand Acres".