Wood began her career appearing in several made-for-television films from 1994 and onwards, also playing an occasional role in the television series American Gothic. In 1996, Wood's parents separated and later divorced, and Wood moved with her mother to her mother's native Los Angeles County, California. After a one-season role on the television drama, Profiler, Wood was cast in the supporting role of Jessie Sammler on the television show Once and Again. Wood's first major screen role was in the low-budget 1998 film, Digging to China, which also starred Kevin Bacon and Mary Stuart Masterson. Wood remembers the role as initially being "hard", but notes that it eventually led to her decision that acting is something she "might never want to stop doing". In 2002, Wood played a supporting role in the film S1m0ne, which starred Al Pacino. Wood's breakthrough movie role followed, with the somewhat controversial 2003 independent film Thirteen. The film garnered strong critical acclaim, and her performance was nominated for a Golden Globe Award as Best Actress - Drama and for a Screen Actors Guild (SAG) Award for Best Actress. During the time of Thirteen's release, Vanity Fair named Wood as one of the It Girls of Hollywood, and she appeared, along with the other actresses, on the magazine's July 2003 cover. A supporting role opposite Cate Blanchett and Tommy Lee Jones, in Ron Howard's The Missing, followed the same year.

In 2005, she appeared in The Upside of Anger, opposite Kevin Costner, and Joan Allen, a well-reviewed film in which Wood played one of several sisters dealing with their father's absence. Her next two starring roles were in the dark independent films, Pretty Persuasion (also 2005), in which she played a villainous, sexually active high-schooler, and Down in the Valley, in which her character falls in love with an older man posing as a cowboy (Edward Norton). Wood has commented on her choice of sexually themed roles, saying that she is not aiming for the "shock factor" in her film choices. In 2005, Wood starred in the music videos for Bright Eyes' "At the Bottom of Everything" and Green Day's "Wake Me Up When September Ends". In September of 2006, she received Premiere magazine's "Spotlight Award for Emerging Talent". Later that year, Wood appeared with an all-star ensemble cast in the film, Running With Scissors. Also in 2006, she was described by The Guardian as being "wise beyond her years" and as "one of the best actresses of her generation"^.

Wood has roles in two films released in September, 2007: King of California and Across the Universe , a musical directed by Julie Taymor and set in the United Kingdom, United States and Vietnam; Wood sang musical numbers live during filming in the latter film. Starring in the Vadim Perelman directed The Life Before Her Eyes, Wood plays a younger version of a character played by Uma Thurman; Wood has stated that she intends the film to be the last time she plays a teenager. She also provides the voice of an alien in the animated film Terra, scheduled for 2008, will play writer Anne Brontė in the film Brontė, and will be involved in the film Phantasmagoria: The Visions of Lewis Carroll. Wood has stated that she prefers music to movies and is planning to launch a singing career. Wood and Across the Universe co-star, Jim Sturgess are reported to be involved in the upcoming Julie Taymor Broadway production of a Spider-Man musical adaptation. Music for the show will be composed and written by Bono and The Edge, of the band U2.