In the mid-1980s she gained critical acclaim for roles in films by Peter Bogdanovich (Mask) and David Lynch (Blue Velvet, Wild at Heart). Dern's starring role in Blue Velvet appeared to be a breakthrough but her next notable film took almost four years to be released, Wild at Heart, also directed by Lynch. Dern's affiliation with Lynch has continued with her recent role in Inland Empire.
In 1992, Dern and her mother became the first mother and daughter to be nominated for an Academy Award for acting in the same film in Rambling Rose. They, however, did not play mother and daughter in the film.
She also starred as Ruth in the 1996 satire Citizen Ruth, the directorial debut of Alexander Payne. In a reversal of roles, Dern's mother makes a cameo appearance, with Dern's character screaming a torrent of abuse at her.
In 1997, Dern was featured in Widespread Panic's music video for their song, "Aunt Avis", which was directed by Dern's then boyfriend and future fiancé, Billy Bob Thornton. In 1998, Dern and Stockard Channing co-starred in the Showtime film The Baby Dance. The film, produced by Jodie Foster, followed two couples from different backgrounds through a difficult adoption.
While dating Thornton in 1999, she was cast as his love interest in his film Daddy and Them. The film is about a dysfunctional Arkansas family which includes (again) Diane Ladd, Andy Griffith and Jim Varney in his final film performance. Dern also appeared in Joe Johnston's film October Sky opposite Jake Gyllenhaal and Chris Cooper. Robert Altman called upon Dern's talents to play a Champagne-loving Aunt in his Texas-based comedy Dr. T & the Women in 2000. The film also starred Richard Gere, Helen Hunt and Kate Hudson.
Then came 2001, a busy year for Dern as she took on five films. The first was a TV movie with Ellen Burstyn called Within These Walls. Based on a true story, Dern played a nun who taught female inmates to train dogs for people with special needs. She co-starred with William H. Macy in Focus based on Arthur Miller's novel. Next she co-starred with Steve Martin and Helena Bonham Carter in the dark comedy Novocaine. She also had a minor role in Jurassic Park III. The film I Am Sam with Sean Penn and Michelle Pfeiffer featured Dern in a supporting role.
The 2002 Showtime film Damaged Care starred Dern in the true story of Linda Peeno, who became famous for testifying before the United States Congress against health maintenance organizations after working for them in the 1980s. The real Linda Peeno made an appearance in Michael Moore's documentary Sicko. The 2004 film We Don't Live Here Anymore then gave Dern some of the best reviews of her career, as she portrayed a woman in a troubled marriage opposite Mark Ruffalo.
Dern was part of the ensemble dramedy Happy Endings in 2005. Directed by Don Roos, it follows a loosely connected group of Los Angeles residents through their life trials. The film featured Lisa Kudrow, Maggie Gyllenhaal and Steve Coogan. Dern appeared in the film The Prize Winner of Defiance, Ohio with Julianne Moore and Woody Harrelson. When David Lynch and Dern reunited in 2006 for Inland Empire the critical praise for Dern's lead role was overwhelming. There was speculation among some critics that she would be nominated for an Oscar for that film. Also in 2006, Dern had a supporting role in Lonely Hearts. The story of the famed Lonely Hearts Killers, it starred Salma Hayek, John Travolta and Jared Leto.
Mike White, known for writing School of Rock and The Good Girl, hired Dern for his directorial debut. Released in 2007, the film is a comedy titled Year of the Dog starring Molly Shannon, John C. Reilly and Peter Sarsgaard. Dern will soon be seen opposite Russell Crowe in the independent drama Tenderness.
In an interview, Dern stated that she would reprise her role as Ellie Sattler for Jurassic Park IV.
Dern has done much work on television, most notably Afterburn, for which she received a Golden Globe Award for Best Actress in a Mini-Series or Movie. She guest-starred on The West Wing, as a voice on King of the Hill and as a lesbian who coaxes Ellen DeGeneres out of the closet in the famous "The Puppy Episode" of the television series Ellen. On the April 24, 2007 airing of DeGeneres' talk show, Dern revealed she did not work for more than a year following her appearance in that episode because of resulting backlash, but nevertheless called it an "extraordinary experience and opportunity."
In May 2008, Dern portrayed controversial Florida politician Katherine Harris in the HBO movie Recount about the 2000 United States Presidential Election and received many positive reviews on her performance including a Golden Globe Award for Best Supporting Actress - Series, Miniseries or Television Film.