After a disappointing end to their magnificent playoff run in 2006, the Mavericks sought retribution in the new season. After a rocky 0–4 start, the Mavericks then went on an historic run and posted a 52–5 record over their next 57 games. They finished out the regular season with a record of 67–15, good enough to be tied for 6th place all-time, 1st in the league and the #1 seed in the Western Conference playoffs. Dirk Nowitzki had a dominant season, further cementing his place as one of the game's elite players and was named MVP. Josh Howard was named to the all-star team. However, the 8th seeded Golden State Warriors systematically dismantled the Mavericks in the first round of the playoffs by exploiting matchups and preying on Dirk Nowitzki's weaknesses. Dirk Nowitzki and his 1st place Mavericks were defeated in 6 games by the 8th seeded Warriors to give way to the biggest upset in NBA history. Former NBA champion and All-Star legend Bill Russell stated in his NBA.com blog that he didn't consider it to be an upset, since Golden State was 3–0 vs. the Mavericks in the regular season. The Mavs were exposed defensively. As mentioned, Mavericks star Dirk Nowitzki won the regular season MVP award, which created an awkward dilemma regarding the MVP trophy ceremony. Traditionally, the MVP award is given to the winner in a ceremony between the first and second round of the playoffs. But it's believed the league opted to put some distance between Nowitzki's ceremony and the Mavericks' stunning first-round exit against Golden State. By the time Nowitzki collected his MVP award, nearly two weeks had elapsed since the Mavs were eliminated.

The Mavericks dealt Devin Harris, two first round picks and others in a blockbuster trade to the New Jersey Nets for veteran all-star Jason Kidd and other role players. The Mavericks were 3 and 11 against winning teams since the trade and lost Dirk for a little over a week due to a high ankle sprain injury. He returned April 2nd in a crucial game against the Golden State Warriors in a 111–86 Mavericks victory and helped defeat the Phoenix Suns in a 105–98 win on April 6. This win in Phoenix was especially significant because the Mavs had been nearly unable to defeat a contending team on the road the entire season. Continuing their playoff push, Dirk hit a crucial three-pointer with 0.9 seconds left, defeating the Utah Jazz 97–94 on April 10. This victory guaranteed them a playoff spot and their 8th consecutive 50-win season. In the first round of the playoffs, the Mavericks were eliminated once again, by the New Orleans Hornets 4–1 on the road, 94–99. Just one day after a disappointing season ended, Avery Johnson was dismissed as Head Coach of the Dallas Mavericks. On May 9, 2008, Rick Carlisle was hired as the head coach.