Watts and Ledger call it quits. "They remain close friends," Ledger's rep tells PEOPLE. The two are close enough to briefly rekindle their love in November. On Jan. 22, 2008, Ledger is found dead at his Manhattan residence. The 28-year-old actor died of an accidental overdose of prescription drugs. Days later, Watts attends his private memorial.
Watts receives an Oscar nomination for Best Actress for her heartbreaking performance opposite Sean Penn and Benicio Del Toro in Alejandro González Iñárritu's 21 Grams. Director Peter Jackson tells Vanity Fair, "Naomi has the ability to draw an audience into the interior life of the characters she plays and yet she manages to conceal more than she reveals, so you're always wanting more."
Watts gives her usual dramatic roles a break, laughing it up in the existential comedy I Heart Huckabees. She plays a ditzy, bikini-clad spokeswoman Dawn Campbell opposite Jude Law and Dustin Hoffman.
Watts and The Manchurian Candidate star Liev Schreiber are seen around New York eating cupcakes and going to concerts. The two begin dating.
Watts plays Ann Darrow in director Peter Jackson's remake of King Kong. The film grosses $400 million worldwide and is Watts' most commercial film yet. Her friend director David Lynch tells In Style, "Whoever sits in the palm of King Kong is a movie star for life!"
After lending her face to jeweler David Yurman, Watts appears alongside Sophia Loren and Hilary Swank in the infamously sexy Pirelli Calendar and stars in The Painted Veil opposite real-life boyfriend Liev Schreiber and actor Edward Norton. The actress is also named a special representative to the United Nations for HIV and AIDS.
Watts walks the red carpet in a yellow Escada dress and noticeable bump with fellow Academy Award show presenter and friend Nicole Kidman. Though she hasn't confirmed she's pregnant, Escada's publicist releases a statement saying, "The Escada gown set off her most precious new asset – the baby she is expecting with longtime boyfriend Liev Schreiber." One day later, Schreiber tells Late Night host Conan O'Brien he's going to be a dad.
Watts and Schreiber add another blond baby boy to their brood, with the birth of son, Samuel Kai. "There is much less fear this time," Watts tells PEOPLE. "You are much more old-hand at it."
At 41, Watts returns to her modeling roots, lending her face (and enviable figure!) to Ann Taylor’s fall ad campaign. "I just melt into the cardigans," the mom of two says of her favorite items. "You can wear them all day and feel cozy."
BIOGRAPHY (top to bottom): REX USA; Focus Films/Everett; FOX Searchlight/Everett; Carlo Allegri/Getty/Universal; Weta Digital Ltd./Universal; EPA/PIRELLI; Lucy Nicholson/Reuters/Landov; INF; Splash News Online; Courtesy Ann Taylor