Began his career in TV and made an auspicious feature debut with Do You Remember Dolly Bell? (1981), a coming-of-age story set in Sarajevo in the early 1960s. Dolly Bell won the Golden Lion for best first film at the Venice Festival and was followed by When Father Was Away on Business (1985), also scripted by Muslim poet Abdulah Sidran. An absorbing portrait of provincial life and politics in 1950s Yugoslavia, partially seen through the eyes of a six-year-old child, Father confirmed Kusturica as an international director of note. It won the Palme d'Or at Cannes, five Golden Arena awards (the Yugoslavian Oscars) and an Academy Award nomination as best foreign film.

Kusturica's third feature, Time of the Gypsies (1989), was inspired by a newspaper article about the inter-European trade in young gypsy chidren. It employs an elliptical, fantastic style influenced by Latin American "magic realism" and features nonprofessional, gypsy actors delivering most of their dialogue in Romanian (a language the director barely understands). Gypsies brought further critical acclaim for Kusturica, earning him the best director award at the 1989 Cannes Film Festival; he was awarded the Roberto Rossellini prize for lifetime achievement in film the same year. Kusturica has also taught film directing at Columbia University since 1988.