As an actor he has appeared in over forty films and television programmes since his breakthrough role as Danny Oldsen in Local Hero (1983), including the lead role in Ken Russell's The Lair of the White Worm (1988) and Stephen Frears' Dangerous Liaisons (also 1988). He is also known as an audio book narrator having read many books including several of the works of Iain Banks. He also starred as Rory in the TV version of Banks' The Crow Road.
In 1995 he won an Oscar Best Live Action Short Film and a BAFTA for Franz Kafka's It's a Wonderful Life. He also wrote Soft Top, Hard Shoulder (winner of the audience award at the London Film Festival) and wrote and directed Strictly Sinatra.
He has appeared as fictional Songs of Praise producer Tristan Campbell in two episodes of the sitcom Vicar of Dibley and as a transvestite in ITV's Prime Suspect 3. He has also made an appearance in the hit sitcom Peep Show as a university professor, starred in Aftersun with Sarah Parish, and as a primary character suspect in the 2007 series of Waking the Dead. In the Neil Gaiman gothic fantasy Neverwhere he portrayed the Angel Islington.
In 2007 Capaldi appeared as Mark Jenkins (Sid Jenkins' dad) in the E4 teen comedy/drama Skins where he returned for a second series in 2008 only to be killed off in the 3rd episode, and as characters in the Midsomer Murders episode "Death in Chorus" and ITV1's Fallen Angel. He played a fictional version of Caecilius in "The Fires of Pompeii", a 2008 episode of the science-fiction series Doctor Who. He will return to the Doctor Who franchise in 2009 when he plays civil servant Mr Frobisher in the third series of Torchwood.