Forsyth first came to attention with a low-budget film, That Sinking Feeling, made with youth theatre actors and featuring a cameo appearance by the Edinburgh gallery owner Richard Demarco. The relative success of the film was carried to a far higher level by his next film Gregory's Girl in 1981. This featured some of the same young actors, in particular John Gordon Sinclair, as well as the acting debut of Clare Grogan. The film was a major hit and won 'Best Screenplay' in that year's BAFTA Awards. In 1983 he wrote and directed the successful Local Hero, produced by David Puttnam, and featuring Burt Lancaster. It was rated in the top 100 films of the 1980s in a Premiere magazine recap of the decade. Forsyth's next film was the 1984 Comfort and Joy, about a Glasgow radio DJ caught in a rivalry between ice cream companies, which again featured Clare Grogan.
The 1987 film Housekeeping, an adaptation of Marilynne Robinson's 1981 novel, was Forsyth's first American work.
Bill Forsyth was a favored director of Sir David Puttnam during Puttnam's term as Columbia Studios chairman. Columbia released the film Being Human (1994) directed by Bill Forsyth, starring Robin Williams and featuring John Turturro. The film was about a man developing throughout his life and had scenes from pre-history, Ancient Rome, 16th-century Spanish conquistadors and modern day New York. It was co-produced by Lucy Fisher. Colin Vaines and Jane Witterkind were script editors. The production came into problems budget wise when they had to relocate the production from Morocco to Kenya due to bad seas (the big raft scene got washed down the coast) and Martha Williams not wanting Robin to work in certain areas due to malaria scares. Being Human was not released fully due to bad reviews. The film had several important 'transitional' editing pieces that were important to Bill Forsyth's vision of the movie but they were edited down by a Warner Bros executive following 'focus groups' - the film ended up a shadow of what Bill Forsyth had imagined. After this experience Bill Forsyth was put off making movies.
In 2000 he made Gregory's Two Girls as a sequel to Gregory's Girl, with John Gordon Sinclair playing the same character, but it received mixed reviews.
In a June 2009 interview on BBC Radio 5 Live, Forsyth stated that he is currently working on a new film project with the working title of Exile.