From the late 1980s onward, Dillon achieved further success, starring in Drugstore Cowboy (1989), Singles (1992), The Saint of Fort Washington (1993), To Die For (1995), Beautiful Girls (1996), In & Out (1997), There's Something About Mary (1998), and Wild Things (1998).

[10] In 1978, Jane Bernstein and a friend were helping director Jonathan Kaplan cast the teen drama Over the Edge when they found Dillon cutting class at Hommocks Middle School in Larchmont.

[12] Dillon's performance was well-received, which led to his casting in two films released the following year: the teenage sex comedy Little Darlings, in which Kristy McNichol's character loses her virginity to a boy from the camp across the lake, played by Dillon, and the more serious teen dramedy My Bodyguard, where he played a high-school bully opposite Chris Makepeace.

Another of Dillon's early roles was in the Jean Shepherd PBS special The Great American Fourth of July and Other Disasters.

One of his next roles was in Liar's Moon, where he played Jack Duncan, a poor Texas boy madly in love with a rich banker's daughter.

In 1989, Dillon won critical acclaim for his performance as a drug addict in Gus Van Sant's Drugstore Cowboy.

He had a resurgence when he played Nicole Kidman's husband in To Die For (1995), as well as starring roles in Wild Things (1998) and There's Something About Mary (1998), for which he received an MTV Movie Award for Best Villain.

Two years later he received critical praise and earned Best Supporting Actor Golden Globe and Academy Award nominations for his role in Crash, a film co-written and directed by Paul Haggis.

In 2005, Dillon co-starred in Disney's Herbie: Fully Loaded and on March 11, 2006, hosted Saturday Night Live, in which he impersonated Greg Anderson and Rod Serling in sketches.

Dillon appeared in 1987 in the music video for "Fairytale of New York" by the Irish folk-punk band The Pogues, playing a cop who escorts lead singer Shane MacGowan into the "drunk tank".