Hou generally makes rigorously minimalist dramas dealing with the upheavals of the Taiwanese (and occasionally larger Chinese) history of the past century by viewing its impacts on individuals or small groups of characters. A City of Sadness (1989), for example, portrays a family caught in conflicts between the local Taiwanese and the newly arrived Chinese Nationalist government after World War II. It was groundbreaking for broaching this long-taboo subject and became a major success despite its seemingly uncommercial nature.
His storytelling is elliptical and his style marked by extreme long takes with minimal camera movement but intricate choreography of actors and space within the frame. He uses extensive improvisation to arrive at the final shape of his scenes and the low-key, naturalistic acting of his performers. Without abandoning this famous austerity, his imagery has developed a sensual beauty during the 1990s, partly under the influence of his collaboration with cinematographer Mark Lee Ping-Bin. Hou's consistent screenwriting collaborator since the mid-1980s has been the renowned author Chu Tien-Wen. He has also cast revered puppeteer Li Tien-Lu as an actor in several of his movies, most notably The Puppetmaster (1993), which is based on Li's life.
Hou's films have been awarded prizes from prestigious international festivals such as the Venice Film Festival, Berlin Film Festival, Hawaii International Film Festival and the Nantes Three Continents Festival. Six of his films to date have been nominated for the Palme d'Or (best film award) at the Cannes Film Festival, though the prize has so far eluded him. Hou was voted "Director of the Decade" for the 1990s in a poll of American and international critics put together by The Village Voice and Film Comment. Despite such acclaim, his work remains rarely distributed in the West outside of the film festival circuit.
He directed the Japanese film Café Lumière (2003) for the Shochiku studio as an homage to Yasujiro Ozu; the film premiered at a festival commemorating the centenary of Ozu's birth. The film deals with themes reminiscent of Ozu - tensions between parents and children and between tradition and modernity - in Hou's typically indirect manner. In 2005 his film Three Times - which features three stories of love set in 1911, 1966 and 2005 using the same actors - was the latest to be nominated for a Palme d'Or; it received glowing reviews instead.
Hou has also had some acting experience, appearing as the lead in fellow Taiwanese New Wave auteur Edward Yang's 1984 film, Taipei Story. Hou starred as Lung, a former Little-League baseball star who is stuck operating an old-style fabric business, longing for his past days of glory. Lung becomes alienated from his wife and tries to find his way in the city of Taipei.
Hou is also a singer having contributed two songs to the 1992 soundtrack of Dust of Angels, a movie he also produced.
In August 2006 Hou embarked on his first Western project. Filmed and financed entirely in France, Ballon Rouge (2006) is the story of a French family as seen through the eyes of a Chinese student. The film is the first part in a series of films sponsored by the Musee d'Orsay and stars Juliette Binoche.