His "honeymoon" with Warners over, Garfield entered a protracted period of conflict with the studio, with Warners attempting to cast him in crowd-pleasing melodramas like Dust Be My Destiny and Garfield insisting on quality scripts that would offer challenges and highlight his versatility. The result was often a series of suspensions, with Garfield refusing an assigned role and Warners refusing to pay him. Garfield's Problem was shared by any actor working in the studio system of the 1930s: by contract, the studio had the right to cast him in any project they wanted to. But, as Robert Nott explains:

After a stint with Eva Le Gallienne's Civic Repertory Theater and a short period of vagrancy, involving hitchhiking, freight hopping, picking fruit, and logging in the Pacific North West (Preston Sturges conceived the film Sullivan's Travels after hearing Garfield tell of his hobo adventures) Garfield made his Broadway debut in 1932 in a play called Lost Boy. It ran for only two weeks, but gave Garfield something critically important for an actor struggling to break into the theater: a credit.

Clifford Odets had been a close friend of Garfield from the early days in the Bronx. After Odets' one-act play Waiting for Lefty became a surprise hit, the Group announced it would mount a production of his full-length drama Awake and Sing. At the playwright's insistence, Garfield was cast as Ralph, the sensitive young son who pleads for "a chance to get to first base." The play opened in February 1935, and Garfield was singled out by critic Brooks Atkinson for having a "splendid sense of character development." Garfield's apprenticeship was officially over; he was voted full membership by the company. Odets was the man of the moment, and he claimed to the press that Garfield was his "find" and that he would soon write a play just for him. That play would turn out to be Golden Boy, but when Luther Adler was cast in the lead role instead, a disillusioned Garfield began to take a second look at the overtures being made by Hollywood.

After many false starts, he was finally cast in a supporting, yet crucial role as a tragic young Composer in a Michael Curtiz film titled Four Daughters. After the picture's release in 1938, he received wide critical acclaim and a nomination for the Academy Award for Best Supporting Actor. The studio quickly revised Garfield's contract—designating him a star player rather than a featured one—for seven years without options. They also created a name-above-the-title vehicle for him titled They Made Me a Criminal. Before the breakout success of Daughters, Garfield had made a B movie feature called Blackwell's Island. Not wanting their new star to appear in a low-budget film, Warners ordered an A movie upgrade by adding $100,000 to its budget and recalling Director Michael Curtiz to shoot newly scripted scenes.

Garfield was nominated for the Academy Award for Best Supporting Actor for Four Daughters in 1939 and Best Actor for Body and Soul in 1948.

Long involved in liberal politics, Garfield was caught up in the communist scare of the late 1940s and early 1950s. He supported the Committee for the First Amendment, which opposed governmental investigation of political beliefs. When called to testify before the House Committee on Un-American Activities, which was empowered to investigate communist infiltration in America, Garfield refused to name communist party members or followers, testifying that, indeed, he knew none in the film industry. Garfield rejected communism, and just prior to his death in hopes of redeeming himself in the eyes of the blacklisters, wrote that he had been duped by communist ideology in an unpublished article called "I Was a Sucker for a Left Hook", a reference to Garfield's movies about boxing. However, his forced testimony before the committee had severely damaged his reputation. He was blacklisted in Red Channels, and barred from Future employment as an actor by Hollywood movie studio bosses for the remainder of his career.

He and Roberta Seidman married in February 1935. Though his wife had been a member of the Communist Party, there was no evidence that Garfield himself was ever a communist. They had three children: Katherine (1938–March 18, 1945), who died of an allergic reaction; David (1943–1994); and Julie (born 1946); the latter two later becoming actors themselves.

After the war, Garfield starred in a series of successful films such as The Postman Always Rings Twice (1946) with Lana Turner, Humoresque (1946) with Joan Crawford, and the Oscar-winning Best Picture Gentleman's Agreement (1947). In Gentleman's Agreement, Garfield took a featured, but supporting, part because he believed deeply in the film's exposé of antisemitism in America. In 1948, he was nominated for the Academy Award for Best Actor for his starring role in Body and Soul (1947). That same year, Garfield returned to Broadway in the play Skipper Next to God. Strong-willed and often verbally combative, Garfield did not hesitate to venture out on his own when the opportunity arose. In 1946, when his contract with Warner Bros. expired, Garfield decided not to renew it and opted to start his own independent production company, one of the first Hollywood stars to take this step.

On May 9, 1952, Garfield moved out of his New York apartment for the last time, indicating to friends it was not a temporary separation from his wife Roberta. He confided to columnist Earl Wilson that he would soon be divorced. Close friends speculated that it was his wife's opposition to his planned confession in Look magazine that triggered the separation. He heard that a HUAC investigator was reviewing his testimony for possible perjury charges. His agent reported that 20th Century-Fox wanted him for a film called Taxi, but would not even begin talks unless the investigation concluded in his favor. Three actor friends, Canada Lee, Mady Christians and J. Edward Bromberg, had all recently died after being listed by the committee.

In 1954, Roberta Garfield married attorney Sidney Cohn, who died in 1991. She died in January 2004.

The funeral was the largest in New York since Rudolph Valentino's, with over ten thousand persons crowding the streets outside. The media circus surrounding Garfield's death led to a running joke, "John Garfield Still Dead Syndrome," that parodied the phenomenon; it would later be superseded by "Francisco Franco is still dead" in the 1970s after Franco's protracted terminal illness. Garfield's estate, valued at "more than $100,000," was left entirely to his wife. Shortly afterward, the HUAC closed its investigation of John Garfield, leaving him in the clear. Garfield was interred at Westchester Hills Cemetery in Hastings-on-Hudson, Westchester County, New York.

In The Exorcist (1973), Detective Kinderman says Father Damien Karras "looks like a boxer," and more specifically John Garfield as he appeared in Body and Soul. Doc Sportello, the protagonist in Thomas Pynchon's Inherent Vice, discusses his film appearances throughout the book.

Garfield had been approached by Hollywood studios before—both Paramount and Warners offering screen tests—but talks had always stalled over a clause he wanted inserted in his contract, one that would allow him time off for stage work. Now Warner Bros. acceded to his demand, and Garfield signed a standard feature-player agreement—seven years with options—in Warner's New York office. Many in the Group were livid over what they considered his betrayal. Elia Kazan's reaction was different, suggesting that the Group did not so much fear that Garfield would fail, but that he would succeed. Jack Warner's first order of Business was a change of name to John Garfield.