In 1979, Philip Hedley became the new artistic director, having previously worked as an assistant to Joan Littlewood. The first play he selected for the theatre was Welcome Home Jacko by Mustapha Matura.
Hedley had previously worked as an assistant to Joan Littlewood, and as artistic director, he continued and expanded the educational work she started. Hedley strove to always speak to the theatre’s diverse local audience, giving voice to the great number of communities in East London.
During Hedley’s time as artistic director, Theatre Royal Stratford East engaged in large-scale co-productions with many leading black and Asian companies, including Black Theatre Co-operative/NITRO, Talawa, Tamasha, motiroti, and Tara Arts. The theatre dedicated itself to developing productions reflecting the variety of London cultures, with plays such as Scrape Off the Black, The Fighting Kite, and East is East.
Fantastical tales using the theatre's full potential for flying, trap doors, transformations, and illusions became a regular feature of the theatre's programming. The director Ken Hill became the key exponent of this genre of work with shows such as The Phantom of the Opera, The Invisible Man, Zorro and Curse of the Werewolf.
The theatre’s annual pantomime became hailed as the best in London, focusing on traditional storytelling rather than being sidetracked by television stars and gimmicks.
There was also the trilogy of political farces in the early 1990s by Patrick Prior: Revolting Peasants, Blackboard Bungle and Cut and Trust, dealing with the poll tax, schools, and the NHS. Other political work included the British premiere of Federico Garcia Lorca's The Public, directed and designed by Ultz, which defied Section 28 of the Local Government Act 1988, which banned the promotion of homosexuality.
1990 saw the critical and commercial success of the musical Five Guys Named Moe based on the music of Louis Jordan. The show transferred to the West End, Broadway, becoming a worldwide success. Clarke Peters' Unforgettable, A Tribute To Nat King Cole, also toured into the West End and then internationally.
In 1999, Theatre Royal Stratford East started its Musical Theatre Initiative, which aimed to develop and eventually produce new musicals. The theatre held musical theatre workshops, bringing together an eclectic group of experienced writers, composers, and music producers. Led by lecturers from Tisch School of the Arts in New York City, the workshops explored the craft of musical theatre writing and collaboration.
In 2004, after twenty-five years as artistic director, Philip Hedley resigned from his post. Kerry Michael was appointed as the next artistic director.