On December 19, 2006, the Nuggets traded Joe Smith, Andre Miller and two first-round draft picks of the 2007 NBA Draft to the Philadelphia 76ers for Ivan McFarlin and superstar Allen Iverson (McFarlin was waived immediately following the trade's approval). The moves gave the Nuggets the top two scorers in the league at the time in Anthony and Iverson, who were both scoring over 30 points per game at the time of the trade. On January 11, 2007, Earl Boykins, Julius Hodge and cash considerations were traded to the Milwaukee Bucks, in exchange for point guard Steve Blake. With AI, many considered the Nuggets as one of the elite in the West, alongside the Dallas Mavericks, Phoenix Suns and San Antonio Spurs. However, chemistry would be an issue, as the Nuggets finished the regular season with the #6 seed, giving them a first round matchup with the San Antonio Spurs. In the playoffs, the Nuggets got off to a fast start, winning game 1, taking home court advantage away from the Spurs. However, in an eerie repeat of the 2005 playoffs, the Spurs bounced back to win the next four, as the Nuggets were eliminated in the first round in five games for the fourth straight year.

On March 16, 2008, the Nuggets scored 168 points in a 168–116 home win over Seattle SuperSonics It was the third-most points scored for a regulation game in NBA history.

The Nuggets finished the 2007–08 NBA season with exactly 50 wins (50–32 overall record, tied for the third-best all-time Nuggets record since the team officially joined the NBA in 1976), following a 120–111 home victory over the Memphis Grizzlies in the last game of the season. It was the first time since the 1987–88 NBA season that the Nuggets finished with at least 50 wins in a season. Denver ended up as the 8th seed in the Western Conference of the 2008 NBA Playoffs, and their 50 wins marked the highest win total for an 8th seed in NBA history. It also meant that for the first time in NBA history, all eight playoff seeds in a conference had at least 50 wins. The Nuggets faced the top-seeded Los Angeles Lakers (57–25 overall record) in the first round of the 2008 NBA Playoffs. The seven games separating the Nuggets overall record and the Lakers overall record is the closest margin between an eighth seed and a top seed since the NBA went to a 16-team playoff format in 1983-84. The Lakers swept the Nuggets in four games, marking the second time in NBA history that a 50-win team was swept in a best-of-seven playoff series in the first round.