With Kevin Gildea and Barry Murphy, O'Hanlon founded the International Comedy Cellar, upstairs in the International Bar on Dublin's South Wicklow Street. Dublin had no comedy scene at the time. As a stand-up comic, O'Hanlon won the Hackney Empire New Act of the Year competition in 1994, and was for a time the presenter of The Stand Up Show. For the first fifteen years of his stand-up career, he suffered from debilitating nerves before gigs; "I would get into bed, I'd be sick, I wouldn't be able to eat or read or concentrate on anything — it would go on for hours."
O'Hanlon was cast as Father Dougal McGuire in Father Ted (1995–1998), which he said was his "first proper job in television". During filming, O'Hanlon went to buy shoes. Still being in costume, the seller thought he was a real priest and offered the footwear for free. He and Dermot Morgan (Father Ted) often did their own stunts, and he recalled that on one occasion they were dragged through a field behind a tractor. In 1995, he received the Top TV Comedy Newcomer at the British Comedy Awards for this role. In 1995, he appeared as Father Dougal in a Channel 4 ident ("Hello, you're watching ... television"), and during Comic Relief on BBC1. This was followed by the award-winning short comedy film Flying Saucer Rock'n'Roll.
In a 2019 interview, O'Hanlon said he had attempted to distance himself from Father Ted once the show had finished. He moved into straight acting, alongside Emma Fielding and Beth Goddard, in the ITV comedy-drama Big Bad World, which aired for three series in summer 1999 and autumn 2001. He also had a minor role in The Butcher Boy as Joe's (Francie's best friend) father, and appeared in an episode of the original Whose Line is it Anyway?. In 2000, O'Hanlon starred in the comedy series My Hero, in which he played a naive superhero from the planet Ultron. His character juggled world-saving heroics with life in suburbia. He stayed in the role until the first episode of series 6 in July 2006, when he was replaced by James Dreyfus during the same episode. In September 2001, O'Hanlon appeared on stage alongside Moby at the Slane Festival to perform a duet of My Lovely Horse.
O'Hanlon provided the voice of the lead character in the three Christmas television cartoon specials of Robbie the Reindeer. He appeared in the 2005 BBC One sitcom Blessed, written by Ben Elton, which was publicly slated by Jonathan Ross, albeit in jest, at the 2005 British Comedy Awards. Towards the end of 2005, O'Hanlon played an eccentric Scottish character, Coconut Tam, in the family based film, The Adventures of Greyfriars Bobby. In 2015, he appeared on the same channel as incompetent angel Smallbone in the sitcom The Best Laid Plans.