In 2000, having two straight wins over Jorge Paez and Steve Quinonez, Castillo challenged WBC lightweight titleholder and Ring No. 1 ranked Lightweight Stevie Johnston. Heavily favored as underdog, Castillo was slated to lose. Instead, Castillo scored the Ring Magazine Upset of the Year, defeating Johnston by a majority decision, in what was a very close fight. Three months later, they fought to a draw, memorable because miscalculation adding the scores led to an original announcement of Johnston regaining his title, which Castillo learned about when Johnston showed up in his dressing room to return the strap.

On June 5, 2004, Castillo regained the Lightweight title and won the vacant Ring Lightweight title by defeating Ring No. 1 ranked Lightweight, Juan Lazcano. Castillo won the fight by unanimous decision, by the scores of 117-111, 116-112, and 115-113.

On May 7, 2005, Castillo fought WBO Lightweight champion and Ring No. 1 ranked Lightweight, Diego Corrales. Corrales defeated José Luis Castillo for the WBC lightweight title via TKO in the tenth round. The fight is almost universally regarded as the best fight of 2005. Both men stood in front of each other, battering each other with hard combinations and power punches throughout the entire fight. Finally, in the tenth round, Castillo knocked Corrales down. Seconds later, Castillo knocked Corrales down again. Once on the ground, Corrales managed to beat the count, and, after a point was taken away for excessive spitting out of the mouthpiece, Corrales connected with a punch that Castillo later called “a perfect right hand.” Corrales then trapped Castillo against the ropes and landed numerous punches, causing the referee, Tony Weeks, to stop the fight.

A rematch between Corrales and Castillo occurred on October 8, 2005. On the day before the fight, Castillo weighed-in 3½ lb over the 135 lb (61 kg) lightweight limit. Since Castillo did not make the weight, the fight became a non-title bout. The two fighters continued with the same fighting style that they had used in the first fight, trading inside punches throughout the first three rounds. Early in the fourth round, Castillo knocked down Corrales with a left hook to his chin. Corrales wobbled to his feet at the referee’s count of ten, causing the fight to end.

On January 20, 2007, Castillo won a narrow split decision over Herman Ngoudjo. On June 23, he fought Ricky Hatton in Las Vegas. Castillo was KO’d 2 minutes and 16 seconds into the fourth round by a crunching left hook to the ribs, one of the few times a top ranked boxer of Castillo’s caliber has been KO’ed by a bodyshot and reminiscent of the bout between Roy Jones Jr. and Virgil Hill. Prior to the knockout Castillo had been deducted a point for low blows to his opponent.

Castillo was scheduled to fight Timothy Bradley in 2008 for the right to be number 1 contender to the WBC Super lightweight title, but during the weigh-in on March 8, 2008, Castillo weighed 147½ pounds (7 pounds over the super-lightweight limit). Bradley instead faced and defeated Junior Witter for the title.

On the Pacquiao vs Clottey undercard on March 14, 2010, Alfonso Gomez and Castillo clashed for Gomez’ WBC Continental Americas welterweight title. Ringside reporters have said that the fight was to see if Castillo had it anymore, and for this type of fight such a minor title is nearly an insult. Castillo lost in round 5 by TKO (not answering to the bell). After the bout Castillo announced his retirement, stating, “I just found out tonight I don’t have it anymore, I want to apologize to the public and I am definitely announcing my retirement.”

After announcing his retirement in March 2010, Castillo returned to action in a fight against Roberto Valenzuela on June 18, 2010 and won the bout by unanimous decision. The match was held at the Auditorio Municipal in Tijuana, Baja California, Mexico