Thilakan started his career in acting as a theater artist. He ventured into full time acting in theatre after leaving the intermediate college mid-way in the year 1956. It was during his years in theatre that he honed his skills in acting. During this period he and a few friends formed a drama troupe called the `Mundakayam Nataka Samithy.' He worked with KPAC till 1966 followed by stints in Kalidasa Kala Kendra, Changanacherry Geetha, and P.J. Antony's troupe. Thilakan is now in the fiftieth year of his acting career
In spite of his long association with theatre, Thilakan became a household name only after his foray into Malayalam cinema.He began his career in cinema with a minor role in the film Ulkadal (1979). His first role as a lead character was as Kallu Varkey, a drunkard inKolangal(1981). Thilakan established himself as an actor after he got his first State Award in 1981 for his role in Yavanika. The film Kireedamwas another milestone in his career which is noteworthy for his portrayal of a helpless police man watching silently the fate of his son, played by Mohanlal, who was made into a rowdy by society.
In 1988, he received the National Film Award for Best Supporting Actor for his performance in Rithubhedam. Again in 1995, and in 1998, he won the State awards for Santhanagopalam and Gamanam. He was strongly favored  to get another National Film Award for Best Actor for his performance in the movie Perumthachan. As noted in the rediff interview the award was steered away from him to Amitabh Bachchan. Some of his other notable films are `Sphadikam', `Moonnam Pakkam', `Kireedam', `Namukku Parkkan Munthiri Thoppukal','Mookkilla Rajyathu',`Chenkol', `Randam Bhavam', Kaattu Kuthira, and `Yavanika'.
Thilakan is known to be one of the best supporting actor in the Malayalam movie industry. He has also acted in some of the other South Indian language films such as Tamil. While he performs best when given a serious character role, he has also entertained the audiences with his stints in comedy. This is best noted in a movie named Nadodikkattu. He has also done comedy roles in Films like Chakkikotha Chankaran, Mookilla Rajyathu, Pappan Priyapetta Pappan etc. He truly absorbs the character he plays and his commitment is visible in his movies.
Thilakan portrayed a range of characters. The most admired and popular ones were the super hits with Mohanlal as they portrayed father-son duo. The major of them were Kireedam,Sphadikam, Narasimham and Chenkol. He also played father roles to other popular heroes of his prime. With Mammootty in Sangham, with Jayaram in Veendum Chila Veettu Karyangal and Sandesam, with Dileep in Meenathil Thaalikettu, withKunchacko Boban in Aniyathi Pravu and with Prithviraj in Sathyam. He also played many negative roles. His roles of under world don in Randam Bhavam, Karma and Kaalal Pada were much noted. Also he gave many amazing comical performances in films likeNadodikkattu-Pattana Pravesam (as a coward underworld don), Mookkilla Rajyathu (as a break out from mental hospital),Kuttettan (as a womanizer) and Naaduvazhikal (as a good for nothing person with a lot of vanity). He played lead roles in many movies includingEkantham,Perumthachan,Santhanagopalam, Kaattukuthira, My dear Muthschan, Mughamudra(double role) etc.
Thilakan fell terribly ill in the beginning of 2000's and was hospitalized for long. But he came back into life healthy and slowly returned to acting and proved that the illness had no effect on his prolific acting abilities. After his return to acting, he gave a series of statements in many interviews against prominent figures of Malayalam film industry particularly against Mohanlal. He accused that a bunch of actors belonging to Nair community from Thiruvananthapuram is trying to underplay him. In his come back, he played some character roles with Mammootty, but later accused him for giving him less significant roles. In 2008, he had a hot argument with another great actor Nedumudi Venu which included personal acquisition.
In 2007, he acted in Ekantham for which he won the national award.