The 2006–07 season represented a watershed year for the Raptors franchise. The roster was overhauled, including the selection of 2006 NBA Draft number one pick Andrea Bargnani, the acquisition of point guard T.J. Ford in exchange or Charlie Villanueva, and the signing of shooting guard Anthony Parker and small forward Jorge Garbajosa. Bosh was given a three-year contract extension, while Maurizio Gherardini of Benetton Treviso was hired as the club’s vice-president and assistant general manager.

The first half of the season produced mixed results as Toronto struggled towards the .500 mark. However, Toronto ended the regular season with a 47–35 record, securing the third seed in the Eastern Conference for the 2007 NBA Playoffs along with the Atlantic Division title, as well as homecourt advantage for the first time in franchise history. Bosh recorded career-highs in ppg and rpg and was voted to start in the 2007 NBA All-Star Game. The Raptors were also praised for their improved defense, ball-sharing and tremendous team chemistr Colangelo, Gherardini and Mitchell were credited with Toronto's turnaround this season, which was one of the best in NBA history in terms of league standing and defensive ranking. Mitchell was subsequently named the 2006–07 NBA Coach of the Year, the first coach in Raptors history to receive the honour, while Colangelo was named 2006–07 Executive of the Year On 24 April 2007, the Raptors won their first playoff game in five seasons, with an 89–83 victory over the New Jersey Nets,but lost the series 4–2.

Several changes to the roster were made before the 2007–08 campaign as Toronto sought to reproduce the same form as the previous campaign. Most notably, the Raptors signed Carlos Delfino, Jamario Moon,and three-point specialist Jason Kapono. On the other hand, veteran swingman Morris Peterson joined the New Orleans Hornets. Despite being defending division champions, the Raptors were widely tipped as outside contenders for the division and conference titles. Bargnani's inability to play well consistently, coupled with injuries to Garbajosa (75 games), Bosh (15 games) and Ford (31 games) derailed the possibility of a smooth campaign as the Raptors chalked up six wins less than the previous season. The Raptors ceded the division title to Boston, and qualified for the 2008 NBA Playoffs as the sixth seed where they were pitted against the Orlando Magic, but were eliminated in five games. Whereas the preceding season was considered a success, the 2007–08 campaign was considered a disappointment. Weaknesses in Toronto's game—rebounding, defence, and a lack of a swingman—were brought to sharp focus during the playoffs, and speculation was rife that big changes would be made to the roster.

As it turned out, a blockbuster trade was agreed in principle before the 2008–09 campaign: six-time All-Star Jermaine O'Neal was acquired from the Indiana Pacers in exchange for Ford, Rasho Nesterovič, and Roy Hibbert, the 17th pick in the 2008 NBA Draft, giving the Raptors a potential boost in the frontcourt