The band self-released their debut album Unicorns Are People Too in March 2003 through their own record label Caterpillars of the Community, with a limited press run of 500 copies.
In October of the same year they went back into the studio, recording several new songs as well as reworking a number of songs from their debut. The resulting second album, Who Will Cut Our Hair When We're Gone?, recorded by Mark Lawson in Montreal, was released in November 2003 on the label Alien8 Recordings. It was a notable departure for a label that has traditionally released albums by Avant-Garde and highly experimental artists such as Acid Mothers Temple and noise pioneer Merzbow.
The album received glowing reviews from The Village Voice, NME, online magazine Pitchfork and numerous other publications around the world, and it quickly earned the band a fanatical following on the indie-rock circuit. The band toured constantly for thirteen months following its release, initially supporting fellow Canadian band Hot Hot Heat across North America before proceeding to play to sold-out crowds in Australia, Europe and the UK, as well as touring several more times across the U.S. and Canada.
In November 2004, a split 7" between the Unicorns and noise artists, Man Is The Bastard, for release on Kitty Play Records was announced by the bands website and Pitchfork media but it was never finished.
The band's hectic touring schedule took its toll, however, and by the time of their Australian tour in December 2004 they were showing signs of exhaustion, playing reportedly lukewarm shows and verbally clashing with audience members. On December 28, 2004, a short message appeared on the Unicorns' website reading "THE UNICORNS ARE DEAD, (R.I.P.)", leading fans to speculate as to whether they had broken up.
Thorburn and Thompson continued to collaborate together as Th' Corn Gangg (a pop/hip-hop project) and Islands (a pop project). However, on May 28, 2006, Jamie Thompson announced his departure from Islands.
Penner released a 7" on the Melbourne-based Art School Dropout label. The A-side, The Ghost of Creaky Crater, was recorded in Melbourne on December 19, 2004 while The Unicorns were touring the country. The release was limited to a hundred copies. Penner performed under the name Dub Intefadah and scored the soundtrack for the Indie feature film The Hamster Cage. Alden recently formed a new band called Clues, with Brendan Reed (formerly of the Arcade Fire and Les Angles Morts), and Bethany Or, of the band Shanghai Triad. They made their debut at Pop Montreal in October 2007.