After voicing Pebbles Flintstone in several animated specials, Mullally finally achieved a long-held dream of appearing in Broadway musical when she was cast as Marty in the 1994 revival of the popular "Grease". The following season, she earned kudos as the demure secretary Rosemary Pilkington who finds love with J. Pierpont Finch (Matthew Broderick, then John Stamos) in the hit 'revisal' of the musical "How to Succeed in Business Without Really Trying.” Returning to Los Angeles, she once again made the guest star rounds before finally achieving breakout status as the spoiled socialite turned personal assistant Karen Walker in the NBC sitcom "Will & Grace" (1998-2006). Employing a high pitched nasal voice and showing off her voluptuous figure, Mullally very nearly stole every scene in which she appeared. With Sean Hayes' Jack, the other "sidekick" role, she provided many of the comedy's best moments. As a further display of her talents, Mullally essayed the role of the long-suffering wife to Stanley Tucci's "Winchell" in that 1998 HBO biopic as well as headlined her own one-person stage show, "Sweetheart,” in which she demonstrated her vocal abilities.

Recognizing that Mullally has the gift of making people laugh, she was cast in "Stealing Harvard" (2002) a comedy about a man who turns to a life of crime to finance his niece's college education. After costarring in “Rebound” (2006), a well-intentioned Martin Lawrence comedy vehicle, Mullally—along with Debra Messing, Eric McCormack and Sean Hayes—said a tearful goodbye to “Will & Grace” with the series finale airing in 2006. Mullally earned her second Emmy for her performance as Karen, taking the award for Outstanding Supporting Actress in a Comedy Series. With the last episode of "Will & Grace" come and gone, Mullally moved on to the daytime talk show circuit with her nationally syndicated program, “The Megan Mullally Show” (NBC, 2006- ). The show premiered in September 2006 and featured a mix of talk, variety, celebrity interviews, music and comedy. For Mullally, the adjustment from the comfort of “Will & Grace” was difficult, but challenging—she worked hard in preparing for the grind of putting together an hour-long show five days a week and developed a show around elements she liked from other talk shows, including David Letterman, Jay Leno and Jon Stewart.