England entered the 2003 Rugby World Cup as betting favourites and the number one ranked team in the world. Victories over Georgia, South Africa, Samoa, Uruguay, Wales and France took England to the final, where they faced the hosts and reigning champions Australia. England won 20–17 thanks to a Jonny Wilkinson drop goal in the final seconds of extra time. Woodward was knighted in the 2004 New Year's honours. From 2000 to 2003, Woodward's England compiled a record of 41 wins from 46 matches, which included a perfect record of 20 wins and no losses at Twickenham and 12 successive wins against the Tri Nations. England remain the only team from the Northern Hemisphere to have won the World Cup.
The England squad had to be re-built after the World Cup success, as a number of senior players retired, including captain Martin Johnson, Lawrence Dallaglio and Neil Back. Meanwhile, talismanic fly-half Jonny Wilkinson was sidelined with long-term injuries which would prevent him playing for England again for almost 4 years. England came third in the 2004 Six Nations, losing to Grand Slam winners France and Triple Crown winners Ireland. His last tour as England coach came shortly afterwards, with an ill-fated tour of New Zealand and Australia. England were beaten by New Zealand in two tests, without scoring a single try, going down 36–3 in the first and 36–12 in the second. The team then went to Australia, where they were beaten 51–15.
In February 2004 he was appointed head coach for the 2005 British and Irish Lions tour to New Zealand. The Lions lost the test series 3–0. Woodward's management was criticised by many commentators and players for his initial squad selection, his coaching methods, his handling of the players and the media, his selections on tour – particularly for keeping faith with the England players he knew well – and for not allowing the test team any time to play together before the test series began. He returned from New Zealand with his reputation within rugby severely tarnished.
Woodward's contract with England was due to run until 2007. Following the retirement of key players like Lawrence Dallaglio and Martin Johnson, and finishing third in the 6 Nations after the World Cup success, he found the politics of English rugby difficult to deal with, particularly the Premiership clubs' relations with the England management. Woodward was linked with a switch to football and, although he had denied these rumours, on 1 September 2004, Woodward announced that he would be quitting as England coach.
Initially, a move to Southampton Football Club seemed likely, as Woodward was a friend of chairman Rupert Lowe. Lowe discussed this possibility with the club's board on 2 September 2004. However, in his resignation press conference, Woodward said that his intention was to take the Football Association's Grade Two coaching badges after the 2005 British and Irish Lions tour to New Zealand:
Woodward released his autobiography, Winning!, in 2004. He writes of the triumph of England in the 2003 Rugby World Cup, the preparations and celebrations, and of his personal life, his playing and coaching career. In Winning!, Woodward refers to Yehuda Shinar as one of the people who helped to turn the team around and who helped them win the World Cup. A biography of him, Clive Woodward: the biography, written by Alison Kervin, was published six months later.