structural:summarization, structural:expansion
1994–2012: Breakthrough and acclaim

In 1995, Lee directed Columbia TriStar 's British classic Sense and Sensibility based on the Jane Austen novel of the same name. This made Lee a second-time winner of the Golden Bear at the Berlin Film Festival. It was nominated for seven Academy Awards, and won Best Adapted Screenplay for screenwriter Emma Thompson, who also starred in the movie alongside Alan Rickman, Hugh Grant and Kate Winslet. Sense and Sensibility also won the Golden Globe Award for Best Motion Picture - Drama. Thompson has described the experience of working with Lee in his first English language film, noting how taken aback Lee was when the actors asked questions or provided suggestions, something Thompson notes as uncommon in Chinese culture. Once this disjuncture was bridged, Thompson remembered having "the most wonderful time because his notes were so brutal and funny." Janet Maslin of The New York Times praised Lee's adaptation writing, "Mr. Lee is after something more broadly accessible, a sparkling, colorful and utterly contemporary comedy of manners. He achieves this so pleasantly that Sense and Sensibility matches the Austen-based Clueless for sheer fun".

After this, Lee continued directing in Hollywood. He made The Ice Storm (1997), a drama set in 1970s suburban America, starring Kevin Kline, Sigourney Weaver, Joan Allen, and Tobey Maguire. The film competed at the 1997 Cannes Film Festival for the Palme d'Or. It received the Cannes Film Festival Award for Best Screenplay. Angie Errigo of Empire praised the film writing, "Ang Lee seems incapable of making a less than outstanding movie" adding, "The real beauty of this film is the way in which Ang Lee shifts his story from sex farce to youth drama to tragic despair with the help of a perfect ensemble cast".

Lee made another film, the revisionist Western drama Ride with the Devil (1999), set during the American Civil War. The film which starred Tobey Maguire, Skeet Ulrich, and Jeffrey Wright received mixed reviews and was a box office bomb. Entertainment Weekly described it as "oddly unengaging" and the "waxy yellow buildup of earnest tastefulness seals off every character from our access. These Americans aren't action figures; they're collectible figurines." For a time this interrupted Lee's unbroken popularity – from both general audiences and arthouse aficionados – since his first full-length movie. However, in the late 1990s and 2000s, The Ice Storm had high VHS and DVD sales and rentals and repeated screenings on cable television, which has increased the film's popularity among audiences.

In 1999, Hsu Li-kong, Lee's old partner and supporter, invited him to make a movie based on the traditional " wuxia " genre concerning the adventures of martial artists in ancient China. Excited about the opportunity to fulfill his childhood dream, Lee assembled a team from the United States, Taiwan, Hong Kong, Malaysia and Mainland China for Crouching Tiger, Hidden Dragon (2000). The film starred Chow Yun-fat, Michelle Yeoh, and Zhang Ziyi and surprising success worldwide. With Chinese dialogue and English subtitles, the film became the highest grossing foreign film in many countries, including the United States and the United Kingdom. Critics praised the film. Michael Rechtshaffen of The Hollywood Reporter praised Lee writing, "for his first Chinese-language assignment since 1994’s Eat Drink Man Woman, Ang Lee tries a little martial arts on for size – with jaw-droppingly exhilarating results". He added "A sweeping romantic epic with a strong feminist backbone, the thoroughly entertaining also happens to boast a generous offering of seriously kick-ass action sequences that make The Matrix seem downright quaint by comparison." The film was nominated in 10 Academy Awards including Best Picture, Best Foreign Language Film, and Best Director. It ended up winning Best Foreign Language Film and three technical awards.

In 2003, Lee returned to Hollywood to direct the superhero blockbuster Hulk, his second big-budget movie after the disappointment of Ride with the Devil ' s restricted release. The film was produced by Universal Pictures in collaboration with Marvel Entertainment. It starred Eric Bana as Bruce Banner / The Hulk with supporting performances from Jennifer Connelly, Sam Elliot and Nick Nolte. The film received mixed reviews while being a financial success, grossing over $245 million at the box office. After the setback, Lee considered retiring early, but his father encouraged him to continue making movies. Roger Ebert gave the film a positive review, writing, "Lee is trying to actually deal with the issues in the story of the Hulk, instead of simply cutting to brainless visual effects."

Lee took on a small-budget, low-profile independent film based on Annie Proulx 's Pulitzer Prize -finalist short story, Brokeback Mountain. In a 2005 article by Robert K. Elder, Lee was quoted as saying, "What do I know about gay ranch hands in Wyoming?" In spite of the director's distance from the subject at hand, Brokeback Mountain showcased Lee's skills in probing the depths of the human heart. The 2005 movie about the forbidden love between two Wyoming sheepherders immediately caught public attention and became a cultural phenomenon, initiating intense debates and becoming a box office hit.

The film was critically acclaimed at major international film festivals and won Lee numerous Best Director and Best Picture awards worldwide. Brokeback Mountain was the most acclaimed film of 2005, winning 71 awards and an additional 52 nominations. It won the Golden Lion (best film) award at the Venice International Film Festival and was named 2005's best film by the Los Angeles, New York, Boston, and London film critics. It also won best picture at the 2005 Broadcast Film Critics Association, Directors Guild of America, Writers Guild of America (Adapted Screenplay), Producers Guild of America and the Independent Spirit Awards as well as the Golden Globe Award for Best Motion Picture – Drama, with Lee winning the Golden Globe Award for Best Director. Brokeback Mountain also won Best Film and Best Director at the 2006 BAFTAs. It was nominated for a leading eight Oscars and was the front runner for Best Picture heading into March 5 ceremony, but lost out to Crash, a story about race relations in Los Angeles, in a controversial upset. He became the first non-white person to win the Best Director at the Academy Awards (which he won again for Life of Pi). In 2006, following his Best Director Oscar, Lee was bestowed the Order of Brilliant Star with Grand Cordon, the second highest civilian award, by the R.O.C. government.

His next film was Lust, Caution, which was adapted from a novella by the Chinese author Eileen Chang. The story was written in 1950, and was loosely based on an actual event that took place in 1939–1940 in Japanese-occupied Shanghai, China, during World War II. Lust, Caution was distributed by Focus Features and premiered at international film festivals in the summer and early fall of 2007. In the U.S., the movie received a NC-17 rating (no children 17 and under admitted) from the MPAA mainly due to several strongly explicit sex scenes. This was a challenge to the film's distribution because many theater chains in the United States refuse to show NC-17 films. The director and film studio decided not to appeal the decision. Lee removed 9 minutes from the film to make the content suitable for minor audiences in order to be permitted to show Lust, Caution in mainland China.

Lust, Caution captured the Golden Lion from the 2007 Biennale Venice Film Festival, making Lee the winner of the highest prize for the second time in three years (Lee is one of only four filmmakers to have won the Golden Lion twice). When Lust, Caution was played in Lee's native Taiwan in its original full-length edition, it was very well received. Staying in Taiwan to promote the film and to participate in a traditional holiday, Lee got emotional when he found that his work was widely applauded by fellow Taiwanese. Lee admitted that he had low expectations for this film from the U.S. audience since "its pace, its film language;– it's all very Chinese." The film was submitted by Taiwan for consideration in the Best Foreign Language Film category at the Academy Awards, but the Academy ruled that an insufficient number of Taiwanese nationals had participated in the production, thus disqualifying it from further consideration; it was not nominated for any other category.

Lee was chosen to be president of the jury for the 2009 Venice Film Festival. Lee's next film after 2009's Taking Woodstock was Life of Pi, which was adapted from the novel of the same name written by Yann Martel. The story was a retrospective first-person narrative from Pi, a then 16-year-old boy from India, who is the only human to survive the sinking of a freighter on the way from India to Canada. He finds himself on a lifeboat with an orangutan, a hyena, a wounded zebra and a Bengal tiger. During this unlikely journey, young Pi questions his belief in God and the meaning of life. The novel was once considered impossible to make into a movie, but Lee persuaded 20th Century Fox to invest $120 million and heavily relied on 3D special effects in post-production. Unlike most other sci-fi precedents, Lee explores the artistic horizon of applying 3D effects and pushes the boundary of how this technology can serve the movie's artistic vision. The movie made its commercial premiere during Thanksgiving weekend of 2012 in the US and worldwide, and became a critical and box office success. In January 2013, Life of Pi earned 11 Academy Award nominations, including Best Picture, Best Director, Best Adapted Screenplay and Best Visual Effects. He went on to win the Academy Award for Best Director.