In 2002, she starred in productions of Twelfth Night and Uncle Vanya at the Donmar Warehouse, and was nominated for the Olivier Award for Best Actress for the latter.

She was nominated for the Academy Award for Best Actress for her debut film role as a newlywed in Lars von Trier's Breaking the Waves (1996) and for her portrayal of Jacqueline du Pré in Anand Tucker's Hilary and Jackie (1998).

Watson's other films include The Boxer (1997), Gosford Park (2001), Punch-Drunk Love (2002), Red Dragon (2002), The Life and Death of Peter Sellers (2004), Corpse Bride (2005), Miss Potter (2006), Synecdoche, New York (2008), Oranges and Sunshine (2010), War Horse (2011), The Theory of Everything (2014), Kingsman: The Golden Circle (2017), God's Creatures (2022), and Small Things like These (2024).

[2] Her father, Richard Watson, was an architect, and her mother, Katharine (née Venables), was an English teacher at St David's Girls' School, West London.

[13] Watson was virtually unknown until director Lars von Trier chose her to star in Breaking the Waves (1996) after Helena Bonham Carter dropped out.

[15] Watson came to public notice again in another controversial[clarification needed] role, that of cellist Jacqueline du Pré in Hilary and Jackie, for which she learned to play the cello in three months,[3] and received another Oscar nomination.

Though she won the title role of Frank McCourt's mother in the adaptation of his acclaimed memoir, Angela's Ashes, the film underperformed.

2005 saw Watson star in four films: Wah-Wah, Richard E. Grant's autobiographical directorial debut; Separate Lies, directed by Gosford Park writer Julian Fellowes; Tim Burton's animated film Corpse Bride, with Johnny Depp and Helena Bonham Carter; and John Hillcoat's Australian Western, The Proposition.

In 2007, she appeared in The Water Horse: Legend of the Deep, an adaptation of the Dick King-Smith children's novel about the origin of the Loch Ness Monster.

[23] In 2008, Watson starred with Julia Roberts and Carrie-Anne Moss in Fireflies in the Garden,[24] the Lifetime Television movie The Memory Keeper's Daughter (based on the novel with the same name), and in screenwriter Charlie Kaufman's directorial debut, Synecdoche, New York.

In 2011, she played Janet Leach in the ITV two-part film Appropriate Adult, about serial killer Fred West, for which she won a BAFTA.

She also received rave reviews[29] for her portrayal of Julie Nicholson in the BBC Drama A Song for Jenny, with experts tipping her to win the British Academy Television Award for Best Actress.

[37] Receiving her award in the crowded House of Commons, she spoke out against the possibility that the Children's Commissioner become a figurehead with little real power.