Moving to Island Records, Waits made Swordfishtrombones (1983), which found him experimenting with horns and percussion and using unusual recording techniques. The same year, he appeared in Coppola's Rumble Fish and The Outsiders, and, in 1984, he appeared in the director's The Cotton Club. In 1985, he released Rain Dogs. In 1986, he appeared in Down by Law and made his theatrical debut with Chicago's Steppenwolf Theatre in Frank's Wild Years, a musical play he had written with Brennan. An album based on the play was released in 1987, the same year Waits appeared in the films Candy Mountain and Ironweed. In 1988, he released a film and soundtrack album depicting one of his concerts, Big Time. In 1989, he appeared in the films Bearskin: An Urban Fairytale, Cold Feet, and Wait Until Spring. His work for the theater continued in 1990 when Waits partnered with opera director Robert Wilson and beat novelist William Burroughs and staged The Black Rider in Hamburg, Germany. In 1991, he appeared in the films Queens' Logic, The Fisher King, and At Play in the Fields of the Lord. In 1992, he scored the film Night on Earth; released the album Bone Machine, which won a Grammy Award for Best Alternative Music Album; appeared in the film Bram Stoker's Dracula; and returned to Hamburg for the staging of his second collaboration with Robert Wilson, Alice. The Black Rider was documented on CD in 1993, the same year Waits appeared in the film Short Cuts.
A long absence from recording resulted in the 1998 release of Beautiful Maladies, a retrospective of his work for Island. In 1999, Waits finally returned with a new album, Mule Variations. The record was a critical success, winning a Grammy for Best Contemporary Folk album, and was also his first for the independent Epitaph Records' Anti subsidiary. A small tour followed, but Waits jumped right back into the studio and began working on not one but two new albums. By the time he emerged in the spring of 2002, both Alice and Blood Money were released on Anti Records. Blood Money consisted of the songs from the third Wilson/Waits collaboration that was staged in Denmark in 2000 and won Best Drama of the Year. After limited touring in support of these two endeavors, Waits returned to the recording studio and issued Real Gone in 2004. The album marked a large departure for him in that it contained no keyboards at all, focusing only on stringed and rhythm instruments. Glitter and Doom Live appeared in 2009. Waits didn't release another studio album of new material until 2011, when he issued Bad as Me on Anti in the Fall. He uncharacteristically issued a track listing two months in advance of the release, and the pre-release title track as a digital single. He also took the unusual step of releasing a video in which he allowed bits of all the album's songs to play while he scolded bloggers and peer-to-peer sites for invading his privacy.