In 1996, Kapoor played the female lead in Dharmesh Darshan's Raja Hindustani opposite Aamir Khan. The movie was the highest grossing film of the yearand she won her first Filmfare Best Actress Award. The following year, she won the Filmfare Best Supporting Actress Award and the National Film Award for Best Supporting Actress for her role in Yash Chopra's super-hit,Dil To Pagal Hai opposite Shahrukh Khan and Madhuri Dixit.
In 2000, she won her second Filmfare Best Actress Award for her performance in Khalid Mohammed's Fiza. Her performance in the film was much appreciated as she surprised the audiences and the critics showing great emotional range and depth. She also achieved critical acclaim for her role in the film, Zubeidaa (2001), which garnered her the Filmfare Critics Award for Best Performance. Her performance in Shakti - The Power (2002) was highly appreciated and earned her many nominations in the Best Actress category.
In 2003 she played the leading role in the television series Karishma: A Miracle of Destiny. After her film, Baaz: A Bird In Danger which also released in 2003, she took a sabbatical from full time acting for three years.