In 1998, in what was to be his last season for St Kilda, Winmar played 23 games and kicked 16 goals. He was heavily criticised during the club's match against Carlton in Round 20 after spending much of the game fighting with opponents, finishing with only eight disposals. Winmar was suspended by the club for the following match but returned to play for the club in the finals series. After the match, Winmar's manager, Peter Jess, was criticised for making comments in an interview with radio station 3AW suggesting that Aboriginal players were unable to cope with the pressures introduced by "white society".
Winmar was dismissed from St Kilda at the end of the 1998 season after Tim Watson replaced Stan Alves as coach of the club. Despite being contracted for another year, the club terminated Winmar's contract as a result of his behaviour and lack of discipline over the previous season. He was then selected by the Western Bulldogs with the 30th pick overall in the 1998 National Draft, having been considered a chance to be drafted by Collingwood, North Melbourne or Carlton. Winmar played a total of 21 games for the club, kicking 34 goals, before retiring from the Western Bulldogs at the end of the 1999 season, halfway through a two-year contract, citing issues with a commitment to training and injuries. Winmar was named National Aboriginal Sportsman of the Year at the National Aboriginal and Torres Strait Islander Sports Awards held in Hobart, Tasmania, sharing the award with rugby league player Cliff Lyons.
Winmar was involved in a number of controversial incidents involving alleged acts of racial vilification against him by other players and staff during his career. In 1998, after Winmar's outburst against Carlton, former Hawthorn player Dermott Brereton publicly apologised to Winmar and Russell Jeffrey for abusing them in a game in 1990. In March 1999, television presenter and former footballer Sam Newman appeared on The Footy Show in blackface after Winmar cancelled an appearance on the show in favour of appearing on a rival network. Newman was later forced to apologise for the incident, subsequently breaking a confidentiality agreement that had been signed during mediation for the incident. Winmar appeared on The Footy Show the following week as part of a pre-taped segment.
Winmar donated the jumper he was wearing in the photograph to the Aboriginal and Torres Strait Islander Commission (ATSIC) in 1998. Prior to the commission's disbanding in 2005, Geoff Clark, the chairman of ATSIC at the time, removed the framed jumper from the commission's offices in Canberra to his home in Warrnambool, Victoria. Clark was forced to return the jumper to Winmar, which was later donated to the National Museum of Australia, where it featured in Off the Walls, an exhibit of Indigenous Australian art. In May 2012, the jumper was auctioned by Sotheby's, but was passed in after the bidding reached A$95,000. In September of the same year, Museum Victoria purchased the jumper for $100,000, with the intention to display it at the First Peoples exhibition at Melbourne Museum in July 2013. However, the authenticity of the jumper has been questioned, with the St Kilda Football Club published a statement in March 2005 suggesting that the jumper given to ATSIC may not have been the actual jumper worn during the game, citing differences between sponsors' logos present on the jumper. Similar questions were raised prior to the jumper's auction in 2012.