Tunstall sang with Scottish band Travis on their 2007 album The Boy with No Name, on the track "Under the Moonlight", a song written by Susie Hug (late of Katydids).
Tunstall's second album, Drastic Fantastic, premiered on 3 September 2007 in Scotland, followed a week later on 10 September 2007 with the London release for Britain and 18 September 2007, in the US. In its first week, Drastic Fantastic reached No. 1 on the Scottish Album Charts, No. 3 on the British Charts, and No. 9 in the American Charts. The album's lead single, "Hold On", was released in the UK in August 2007, débuting at No. 34 there before peaking at No. 21. The song was also very successful in certain European nations peaking at No. 19 in Italy, No. 19 in Norway, No. 26 in Switzerland and No. 39 in Ireland. The album's second single, "Saving My Face", was released in December 2007. The song did not make the UK Top 40 Singles Charts, but however did managed to peak at No. 50 on the UK Singles Charts, managing three weeks on the UK Charts. Despite missing the UK Top 40, the song made the Top 40 in Italy, making No. 23 and in Switzerland peaking at No. 93. The album's third single and final worldwide single, "If Only", was released in March 2008, becoming the second single from the album not to make the UK Top 40, it managed No. 45 in audition.
On 5 October 2007, the US discount department store chain Target, in association with NBC, released a special KT Tunstall Christmas EP on CD, Sounds of the Season: The KT Tunstall Holiday Collection. On 10 December 2007, it was released in Europe through Relentless under the title Have Yourself a Very KT Christmas.
Tunstall also worked with Suzanne Vega on her 2007 album Beauty & Crime, singing backup on songs "Zephyr and I" and "Frank and Ava". It was revealed in the booklet by Vega that the two had never met during the process of making the album.
Similar to her initial début on music show Later... with Jools Holland, Tunstall has performed on various American talk shows, including The Ellen DeGeneres Show on 21 September 2007. Since her talk show days, she has performed at numerous large concerts such as the Hogmanay Edinburgh Concert in 2005, the American leg of Live Earth in 2007, and the Nobel Peace Prize Concert also in 2007. Tunstall said prior to the Hogmanay performance that "This is the gig of a lifetime... This Hogmanay party is probably the best-known and best-loved in the world, and I've been here a few times over the years dreaming of being the one entertaining the crowds. Until we're on that stage I won't believe we're allowed on it."
In April 2007, Tunstall underwent surgery to correct an undersized kidney, a problem caused by a childhood infection.
In 2007 Tunstall joined the Disko Bay Cape Farewell expedition to the West Coast of Greenland in September 2008. Cape Farewell is a British-based arts organisation that brings artists, scientists and communicators together to instigate a cultural response to climate change.
She gained more nominations in 2007 and 2008: a 2007 Grammy Award nomination for Best Female Pop Vocal Performance for "Black Horse and the Cherry Tree" (the award went to Christina Aguilera for "Ain't No Other Man"), and another BRIT nomination for British Female Solo Artist – the same accolade she had won in 2006.