In 2004, she got critical recognition for her performance as a merciless avenger in Ram Gopal Verma's
Ek Hasina Thi, co-starring
Saif Ali Khan. She played the role of a deceived woman who is jailed because of her lover, played by Khan, and later flees from prison to avenge him. Once again, Matondkar was nominated for a Filmfare for her performance in the film.
Next year in 2005, she tried her hand with another horror film, playing the title role in the film
Naina, which failed. However, her performance as the caring daughter of
Anupam Kher in
Jahnu Barua's art film
Maine Gandhi Ko Nahin Mara was very well received, and she won her second
Bollywood Movie Award for Best Actress.
Apart from holding a successful acting career, she is regarded as an outstanding dancer and has been a featured performer in many Bollywood
item numbers. Her best-known item number is the
Chamma Chamma sequence from the 1998
China Gate. Other hit numbers include
Aaiye Aajaye from the hit film
Lajja. She was signed to perform the item song in
Ram Gopal Varma Ki Aag, a remake of the 1975 blockbuster
Sholay. She played the role originally played by
Helen.
In 2007, Matondkar lent her voice for
Asha Bhonsle's album
Asha and Friends Vol 1, where she performed with Bhosle the duet song "Mehbooba Dilruba". In fact, throughout the 1990s – 2000s, Bhosle sang the maximum number of songs for Urmila.
In 2008, Matondkar was seen with
Himesh Reshammiya in a remake of the 1980 film
Karz,
Karzzzz. 2008 also marked Matondkar's debut on
Indian television as a host of a reality show named
Waar Parriwar.