Happy Times, a relatively unknown film by Zhang, was based loosely on the short story Shifu: You'll Do Anything for a Laugh, by Mo Yan. Starring popular Chinese actor Zhao Benshan and actress Dong Jie, it was an official selection for the Berlin International Film Festival in 2002.
Zhang's next major project was the ambitious wuxia drama Hero, released in China in 2002. With an impressive lineup of Asian stars, including Jet Li, Maggie Cheung, Tony Leung Chiu-Wai, Zhang Ziyi, and Donnie Yen, Hero told a fictional tale about Ying Zheng, the King of the State of Qin (later to become the first Emperor of China), and his would-be assassins. The film was released in North America in 2004, two years after its Chinese release, by American distributor Miramax Films, and became a huge international hit. Hero was one of the few foreign-language films to debut at number 1 at the U.S. box office, and was one of the nominees for Best Foreign Language Film at the 2003 Academy Awards.