In the 2004 NHL Entry Draft, the Capitals won the Draft Lottery, moving ahead of the Pittsburgh Penguins who had the NHL's worst record, and selected Alexander Ovechkin first overall. During the NHL labor dispute of 2004–05, which cost the NHL its entire season, Ovechkin stayed in Russia, playing for Moscow Dynamo. Several other Capitals played part or all of the lost season in Europe, including Olaf Kolzig, Brendan Witt, and Jeff Halpern. The Capitals' 2005 off-season consisted of making D.C.-area native Halpern the team's captain, signing Andrew Cassels, Ben Clymer, Mathieu Biron and Jamie Heward, and acquiring Chris Clark and Jeff Friesen via trade. In the current era of the Capitals, they have been a regular season powerhouse, but with consistent playoff disappointments they have failed to live up to the lofty standards expected of them.
The Capitals finished the 2005–06 NHL season in the cellar of the Southeastern Division again, with a 29–41–12 campaign, having 12 more points than the 2003–04 Season, good for 27th out of the 30 NHL teams. Yet the team played close in every game, playing in 42 one-goal games, although losing 2/3 of those games. Ovechkin's rookie season exceeded the hype, as he led all 2005–06 NHL rookies in goals, points, power-play goals and shots. He finished third overall in the NHL in scoring and tied for third in goals; and his 425 shots not only led the league, but also set an NHL rookie record and was the fourth-highest total in NHL history. Ovechkin's rookie point total was the second-best in Washington Capitals history, and his goal total was tied for third in franchise history. Ovechkin won the Calder Memorial Trophy, beating out Pittsburgh center Sidney Crosby and Calgary Flames defenseman Dion Phaneuf.
Many longtime Capitals had career years, with Dainius Zubrus netting 57 points, Halpern having a career-best 33 assists, Matt Pettinger putting in a career-best 20-goal, 38-point effort and seven others on the relatively young team topping 20 points for the first time. Two notable landmarks were also hit by Capitals, as the team's longest tenured Capital, Olaf Kolzig, won his 250th game in goal and Andrew Cassels became the 204th player to play 1,000 games, although he did not finish out his season with the team. A notable first was that Washington area native Jeff Halpern was named captain of his hometown Capitals. At the 2006 trade deadline, March 8, Brendan Witt was traded to Nashville.
In the 2006 offseason, Halpern left the Capitals to join the Dallas Stars; Chris Clark became the Capitals' new captain. Richard Zednik returned to the Capitals in 2006–07 after a disappointing 16-goal, 14-assist season in 2005–06 with Montreal, but was later dealt at the trade deadline to the New York Islanders after a disappointing and injury plagued season; the Caps also signed former Philadelphia Flyers enforcer Donald Brashear.
Yet the Capitals finished with the same point total (70) in 2006–2007 as they did the year before, although they won one less game. Alexander Ovechkin was the Capitals' lone representative in the All-Star game. The year was also notable for the breakout of Alexander Semin, who notched 38 goals in only his second NHL season.
The Capitals signed Swedish phenom Nicklas Backstrom, the fourth overall pick in the 2006 NHL Entry Draft, to three-year entry-level contract. They also signed 19-year-old Semyon Varlamov to a three-year entry-level contract. They then went on to fill needs at defense, by signing puck moving defenseman Tom Poti, right wing, by signing Viktor Kozlov, and center, by signing playmaker Michael Nylander. Because of these signings there was much more hope for the 07–08 season and players were looking towards the playoffs.
After starting the season 6–14–1, the Capitals fired coach Glen Hanlon and replaced him with Hershey Bears coach Bruce Boudreau on Thanksgiving Day, 2007. On January 10, 2008, the Capitals signed Ovechkin to a league-record $124 million contract extension; at 13 years, it also had the second-longest term of any contract in the NHL, after New York Islanders goaltender Rick DiPietro's 15-year contract.
Despite the Capitals' young defense and injuries to key players such as Michael Nylander and Brian Pothier, Boudreau engineered a remarkable turnaround. Aided by key moves at the trade deadline (Matt Cooke, Sergei Fedorov and Cristobal Huet), Ovechkin's league-leading 65 goals, and Mike Green's NHL defenseman leading 18 goals, the Capitals won the Southeast Division title for the first time since the 2000–01 NHL season, edging out the Carolina Hurricanes for the division title on the final game of the season. Their remarkable end of season run included winning 11 of the final 12 regular season games. The Capitals became the first team in NHL history to make the playoffs after being ranked 14th or lower in their conference standings at the season's midpoint. The Capitals drew the Philadelphia Flyers in the first round, and managed to force a Game 7 after being down 3-1 in the series. They ultimately lost to the Flyers 3–2 in OT. After the season concluded, Boudreau's efforts were rewarded with a long term contract.
The accolades for the team continued to grow after the end of the season. Alex Ovechkin won the Art Ross Trophy, the Maurice "Rocket" Richard Trophy, the Hart Trophy and the Lester B. Pearson Award. Ovechkin became the first player in NHL history to win all four awards in the same season. He also was the first player to win an MVP award in any major sport in the Washington, DC area since Joe Theismann won the NFL MVP in 1983. Moreover, he was named an NHL First Team All-Star and became the first player since 1953 to be named as such in each of his first three years in the NHL. Nicklas Backstrom was a finalist for the Calder Trophy, but ended up second to the Chicago Blackhawks' Patrick Kane; however, Backstrom was still selected to the All-Star Rookie Team. Bruce Boudreau won the Jack Adams Award for NHL best coach. Ovechkin and Mike Green were named to the Sporting News All-Star Team, with Ovechkin being the Sporting News Player of the Year.
The 2008-09 NHL season was highlighted by the play of Green (who was the third of the Capitals' 3 first-round selections in Ovechkin's draft year) and Ovechkin. Green led all NHL defensemen in goals and points. He set the record for the longest consecutive goal scoring streak by a defenseman with eight games. Ovechkin won his second Hart Trophy, his second Lester B. Pearson Award and his second Maurice "Rocket" Richard Trophy. The Capitals finished the regular season with a record of 50-24-8 and a team record 108 points, and they won their second consecutive Southeast Division championship. They defeated the New York Rangers in the first round of the 2009 Stanley Cup Playoffs 4 games to 3, overcoming a 3-1 deficit. The Capitals were then defeated by the eventual champion Pittsburgh Penguins in the Eastern Conference semi-finals in seven games.
The Capitals finished the 2009-10 NHL season regular season first in the league with 121 points and won the Presidents' Trophy. Ovechkin lead the team in points with 109, and finished as the third highest goal scorer, despite playing 9 games fewer than the league leaders Sidney Crosby and Henrik Sedin. Backstrom finished with 101 points, fourth most in the NHL. Once again, Mike Green led all defensemen in points, finishing with 76. The Capitals also dominated the plus/minus category, finishing with 5 players in the top six. Despite having a top-ranked regular season, they were defeated by the 8th seeded Montreal Canadiens in the first round of the playoffs.
The 2010-11 NHL season saw the Capitals repeat as the Southeast Division champions and the top team in the Eastern Conference with 107 points. The season was highlighted by their participation in the 2011 NHL Winter Classic, where they defeated the Pittsburgh Penguins 3-1 at Heinz Field. However, the Capitals' playoff disappointment continued. After defeating the New York Rangers in five games of the first round, they were swept by the Tampa Bay Lightning in the Eastern Conference semifinals.
The Capitals made a splash in the 2011 Free Agent Frenzy, signing Troy Brouwer (a restricted free agent in a trade from Chicago) and Roman Hamrlik to two year deals, Joel Ward to a four year deal and brought former captain Jeff Halpern back with a one year deal on July 1. Tomas Vokoun, the top free agent goaltender, signed with the club on July 2 to a one year contract. Christian Hanson, son of Hanson brother David, joined the club on July 10.
The Capitals started the 2011–12 NHL season with a record of 7-0, but they only won five of their next 15 games. As a result, General Manager George McPhee fired head coach Bruce Boudreau and hired Capitals legend Dale Hunter to replace him.
By the end of the 2011-2012 season, the team's top two goaltenders, Michal Neuvirth and Tomas Vokoun, were injured and the Capitals were required to lean on their goaltending prospect Braden Holtby to help the team into the playoffs. The Capitals made a strong push and finished with the 7th overall seed in the Eastern Conference and drew the defending champion Boston Bruins in the first-round. The Capitals shocked the NHL by defeating the heavily-favoured Boston Bruins in 7 games on an overtime goal by Joel Ward. Young goaltender Braden Holtby was remarkable in his first-ever professional playoff series and outplayed defending Vezina and Conn-Smythe winner Tim Thomas for most of the series. Previously, no single series in the Stanley Cup playoffs had ever gone as far as 6 or 7 games while neither team ever held more than a one goal lead. For the first time in NHL history, the Bruins and Capitals completed an entire 7 game playoff series without more than a one goal differential.
The Capitals then advanced to the second-round to face the first seeded New York Rangers. The first four games yielded one home and one away win for each team. With the series deadlocked at 2-2, the Capitals looked to win game 5 while leading 2-1 in the third period. The Rangers pulled goalie Henrik Lundqvist which gave the Capitals an opportunity in the final minutes to score on an empty net and ensure victory. However, during a face off with 22 seconds remaining in regulation the Capitals surrendered a high sticking minor penalty that coupled with a second minor for drawing blood. With Lundquist still on the bench, the Rangers power play attacked with 6 skaters against 4 Capitals penalty killers backed by Braden Holtby. While Holtby tried to cover a loose puck shot by Ryan Callahan, another Rangers forward Brad Richards scored a game tying goal with less than 7 seconds left. The Rangers won the game quickly in overtime during the second portion of the double minor. In game 6, the Capitals commanded a 2-0 shut out going into the last minute. Despite yielding a goal in the last minute for the second game in a row, the Capitals warded off elimination and forced a game 7 at Madison Square Garden. In game 7, the Rangers opened the scoring early, as the Capitals had in game 6, with a goal in the first five minutes of the game. The team to score first in games 1 through 6 had won every game, so the Capitals were facing a steep climb. There was no scoring in the second period, and the Capitals were not able to capitalize on any of the many scoring chances that they had in the period. The Rangers scored again in the third period, but less than 40 seconds later, Roman Hamrlik finally scored his first goal of the playoffs to bring it to a one-goal deficit for the Capitals. The Capitals went on the power play soon after, but were not even able to test Lundqvist, and even gave up two short-handed two-on-ones that were stifled by Holtby. With less than two minutes to play in regulation, the Capitals tried to pull Holtby for the extra attacker, but were not able to clear the puck from their zone. Finally, with less than 20 seconds left to play, the Capitals, with the extra attacker, won an offensive zone faceoff but were not able to score, losing the game 2-1.