Hathaway continued appearing in comedy-oriented films and was known in the media as a children's role model. The following year, she starred in Nicholas Nickleby (2002) opposite Charlie Hunnam and Jamie Bell, which opened to positive reviews; the Northwest Herald referred to it as "an unbelievably fun film" and the Deseret News said that the cast was "Oscar-worthy". Despite critical acclaim, the film never entered wide release and failed at the North American box office (totaling less than US$4 million). Hathaway's next role was in Ella Enchanted (2004), the film adaptation of the award-winning novel. It received indifferent reviews: the Chicago Tribune called it "shiny candy that tastes oddly familiar yet lacks sugary punch", and the New York Times felt that it was "clichéd and forgetful". However, the Dallas Morning News cited Tommy O'Haver's directing-style as "a Flintstones-like humor to the setting by melding modern with medieval culture".
In 2004 Hathaway was to star opposite Gerard Butler in The Phantom of the Opera, but she rejected the role because of her conflicting contract with Disney, which she was unhappy about. Disney began production on http://bestuff.com/http://bestuff.com/http://bestuff.com/http://bestuff.com/http://bestuff.com/The Princess Diaries 2: Royal Engagement in early 2004 and it was initially going to be filmed in Prague, but the location was changed to Los Angeles, where the "kingdom" of Genovia was built. The film opened to negative reviews and peaked higher at the box office than its predecessor, but ended with lower ticket sales.
2005-present career transition
Hathaway began appearing in less comedic-oriented films after The Princess Diaries 2: Royal Engagement. She said that "anybody who was a role model for children needs a reprieve", although she also noted that "it's lovely to think that my audience is growing up with me", a reference to her previous status as a children's actress. She voiced a version of Little Red Riding Hood in Hoodwinked (2005), which received generally mixed reviews. That same year, Hathaway was cast in the mature-rated Havoc (2005), in which she played a spoiled socialite. In a surprise move, Hathaway was featured in several nude and sexual scenes throughout the film . She also appeared in the drama Brokeback Mountain (2005), opposite Heath Ledger and Jake Gyllenhaal, appearing nude in the film as well. Havoc was not released in theatres in the United States (but was later released in other countries) because of its weak critical reception, but Brokeback Mountain won rave reviews for its depiction of a homosexual relationship in the 1960s, and received several Academy Award nominations, including "Best Picture".Hathaway asserted that its content was more important than its award count.
In an interview with Us Weekly, Hathway spoke about her weight loss for the film. “I basically stuck with fruit, vegetables and fish (to slim down for the movie). I wouldn’t recommend that. Emily Blunt and I would clutch at each other and cry because we were so hungry.”
Hathaway was initially cast in the 2007 comedy Knocked Up but dropped out before filming began. Writer/director Judd Apatow stated in a May 2007 issue of The New York Times Magazine that Hathaway dropped out "because she didn't want to allow us to use real footage of a woman giving birth to create the illusion that she is giving birth." Katherine Heigl replaced Hathaway. In an August 2007 interview with Marie Claire magazine, Hathaway commented on an unnamed film "I turned it down ... because it was going to show a vagina -- not mine, but somebody else's. And I didn't believe that it was actually necessary to the story."
Hathaway was then seen in Becoming Jane, in which she stars as English writer Jane Austen, released in mid 2007. She will also star as Agent in the screen adaptation of the TV series Get Smart, which will premiere in 2008.
Hathaway enjoys interior design and reading as pastimes,and has stated that she is a non-denominational Christian. She has cited Ayn Rand's The Fountainhead (1943) as her favorite novel.Since 2004, Hathaway has been in a relationship with real estate developer Raffaello Follieri.
In regards to personal strife and subsequent media attention, Hathaway's self-subscribed mantra is a quote by Oscar Wilde: "the less said about life's sores the better."