In 2003, she appeared in the Bengali film, Bhalo Theko, for which she won the Anandalok Puraskar Best Actress award in Kolkata. Balan next made her Hindi film debut in the critically acclaimed Parineeta. Though the film didn't do well, her performance was acclaimed by critics, earning her a Filmfare Best Female Debut Award and a nomination for Filmfare Best Actress Award.

After the success of her first two films, the same producer who dropped her from Manasellam was keen to sign her opposite Kamal Hassan for Dasavathaaram but she rejected the offer and Asin Thottumkal was signed instead. In 2006, she appeared opposite Sanjay Dutt in the blockbuster film Lage Raho Munna Bhai. Once again her performance was well received by critics and the film went on to become the second highest grossing film of that year.

Mani Ratnam's critically acclaimed Guru was Balan's first release in 2007, in which she played a woman with a physical disability. The film did very well at the box of