Urmila's first role as a child artist was in 1981 with Kalyug and she achieved success at the age of 9 in Shekhar Kapur's Masoom in 1983. She made her adult debut as an actress with the film Bade Ghar Ki Beti. She next starred in the fantasy film Chamatkar, along with Shahrukh Khan.
She went on to frequently collaborate with film director Ram Gopal Verma, who is known for his thrillers. Her first film with him was Antham, which was a bilingual film and was titled as Drohi (1992 film) in (Hindi). She has also made her appearance in Doordarshan Serial Bible Ki Kahaniyan. Since then, she has starred in numerous subsequent RGV pictures, like Gaayam (Telugu), her 1995 musical hit Rangeela. She played a star-struck dancer in the film, and received her first Filmfare Best Actress Award nomination for her performance in the film. Following RGV projects were Anaganaga Oka Roju (1997), Daud (film) (1997), Satya (1998), Kaun (1999), Mast (2000), Jungle (2000), Pyaar Tune Kya Kiya (2001), Bhoot (2003), and Ek Hasina Thi (2004).
In 1997 her film Judaai was a hit but her other releases such as Daud and Aflatoon were not as successful. Her performance in Judaai earned her a Filmfare Best Supporting Actress Award nomination.
In 1998, she earned critical acclaim for her performance in Satya, for which she received another Filmfare nomination. Satya was a critical and commercial success.
In 1999, she got rave reviews for her performance as a pschycopath in Kaun, which was a moderate success. Khalid Mohamed of The Times of India (who would later cast her in Tehzeeb) wrote that she "rivets the viewer's interest, carrying off entire reels on her shoulders, through a gamut of quicksilver facial expressions. Vulnerable and baffled, she is utterly believable as the traumatised girl-next-door." She saw further success with Jaanam Samjha Karo, Hum Tum Pe Marte Hain and Khoobsurat, all moderate successes at the box office.
During the 2000s, Matondkar revealed strong, dramatic and psychological features in her roles, and delivered a number of critically acclaimed performances. She won favourable reviews for her role as an obsessive lover in Pyaar Tune Kya Kiya (2001), and received various Best Villain nominations for her performance.
In 2003, she was part of several projects. She played the role of a north Indian girl in the background of the 1947 India partition in the critically acclaimed Pinjar. She played the title role in Khalid Mohammed's drama Tehzeeb, starring along Shabana Azmi. However, she was mainly noted for her performance in Bhoot, a horror movie. Matondkar enacted a ghost-possessed woman; her performance was much appreciated by critics and audiences and she won her first Filmfare Award under the Best Actress (Critics' Choice) category, as well as various Best Actress awards at different award ceremonies, such as Star Screen Awards, Zee Cine Awards and Bollywood Movie Awards. She later received the national honour Rajiv Gandhi Award for the film, as a recognition to her achievement in Bollywood. Taran Adarsh wrote of her performance, "...the film clearly belongs to Urmila Matondkar all the way. To state that she is excellent would be doing gross injustice to her work. Sequences when she is possessed are simply astounding. If this performance doesn't deserve an award, no other performance should. It beats all competition hollow."
In 2004, she got critical recognition for her performance as a merciless avenger in Ram Gopal Verma's Ek Hasina Thi, co-starring Saif Ali Khan. She played the role of a deceived woman who is jailed because of her lover, played by Khan, and later flees from prison to avenge him. Once again, Matondkar was nominated for a Filmfare for her performance in the film.
Next year in 2005, she tried her hand with another horror film, playing the title role in the film Naina, which failed. However, her performance as the caring daughter of Anupam Kher in Jahnu Barua's art film Maine Gandhi Ko Nahin Mara was very well received, and she won her second Bollywood Movie Award for Best Actress.
Apart from holding a successful acting career, she is regarded as an outstanding dancer and has been a featured performer in many Bollywood item numbers. Her best-known item number is the Chamma Chamma sequence from the 1998 China Gate. Other hit numbers include Aaiye Aajaye from the hit film Lajja. She was signed to perform the item song in Ram Gopal Varma Ki Aag, a remake of the 1975 blockbuster Sholay. She played the role originally played by Helen.
In 2007, Matondkar lent her voice for Asha Bhonsle's album Asha and Friends Vol 1, where she performed with Bhosle the duet song "Mehbooba Dilruba". In fact, throughout the 1990s – 2000s, Bhosle sang the maximum number of songs for Urmila. In that same year, she was seen on the second season of the dance reality show Jhalak Dikhhla Jaa on Sony Television as a judge along with Jeetendra and Shiamak Davar.
In 2008, Matondkar was seen with Himesh Reshammiya in a remake of the 1980 film Karz, titled Karzzzz. Even though the film flopped miserably at the box office, Urmila was praised for her acting and adding her own flavour to the role of Kamini. That year also marked Matondkar's debut on Indian television as a host of a reality show named Waar Parriwar.
In 2011, Matondkar was one of the judges on the dance reality show named Chak Dhoom Dhoom on Colors channel, along with Javed Jaffrey and Terence Lewis. In 2012, Urmila Matondkar stated her comeback with an animated Hindi feature film Delhi Safari.
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