In 1998, he made his film debut in How Stella Got Her Groove Back. This movie brought Diggs much acclaim and exposure. The following year he played a tantric sex god in Doug Liman's Go, and an AWOL groom in the coming-of-age drama The Wood. Malcolm D. Lee's The Best Man features Diggs as the eponymous character, an author and best friend of the groom (portrayed by Morris Chestnut). He also starred in the remake of William Castle's The House on Haunted Hill. Taye Diggs was featured in an episode of America's Next Top Model, to help the contestants through an acting challenge. Another notable role of his was when he guest starred on the comedy-drama Ally Mcbeal as a lawyer named Jackson Duper who was the love interest of the character Renee Raddick and also the possible love interest on the Ling Woo character.

Diggs portrayed the title character on the short-lived UPN television series Kevin Hill which despite critical acclaim was not renewed for a second season due to the troubles that UPN was having[citation needed]. He reprised the role of Benny for the 2005 Rent film. Diggs is featured on the following cast recordings: Carousel 1994 revival cast; Rent 1996 original Broadway cast; The Wild Party original off-Broadway cast. He also sings on the Rent film soundtrack. In 2002, he reprised his role as the Bandleader in the film adaptation of Chicago, and also played opposite Christian Bale as Bale's partner/antagonist Brandt in the dystopian sci-fi thriller Equilibrium.

In 2003, Diggs was on Punk'd after being tricked by Ashton Kutcher, while getting a check-up at a Punk'd-operated doctor's office. In early 2006, Diggs guest-starred for several episodes as Will Truman's love interest, James, on the final season of Will & Grace. In May, ABC picked up his pilot, Day Break, in which he portrayed a detective trapped in the same day and forced to relive it to clear his name of murder; the show debuted in mid-November 2006, but was abruptly canceled due to poor ratings. Although his film and television career continue to move forward, he still returns to the stage frequently. Most recently he was seen alongside James McDaniel in Charles Fuller's A Soldier's Play at Second Stage Theatre in New York.

Diggs co-stars opposite Kate Walsh in Private Practice, the fall 2007 spin-off of Grey's Anatomy. Diggs had a guest role on The West Wing as a Secret Service agent in charge of the security detail for the President's daughter. He then guest-starred on Grey's Anatomy again in the Grey's Anatomy/Private Practice Crossover Event. Diggs stars in the live adaptation of the comic Dylan Dog: Dead of Night. He also narrated the ESPN Films documentary The Fab Five about University of Michigan basketball players Chris Webber, Juwan Howard, Jalen Rose, Jimmy King, and Ray Jackson.

Taye Diggs married Rent co-star actress Idina Menzel on January 11, 2003. Their son, Walker Nathaniel Diggs, was born on September 2, 2009.
Taye also co-owns and co-directs a dance company, dre.dance with fellow Broadway veteran, Andrew Palermo.