Despite their blistering climb to superstardom, the band would face yet another loss that threatened its demise. In early 1997, drummer sakura was arrested for heroin possession, and officially quit the band on October 4, 1997. This proved to be the lowest point in the band's history. When news of sakura's arrest became public, there was an immediate decline in their popularity. CDs were being removed from the shelves and any of their songs that were used as theme songs were quickly replaced such as the Fourth Avenue Cafe for Rurouni Kenshin which was immediately replaced with former theme Heart of Sword after only 6 episodes of running time. There was no evidence of the band's existence, and their next single the Fourth Avenue Cafe was postponed. Many believe that the whole incident was blown tremendously out of proportion.
In 1997, 「虹」 (Niji — Rainbow), the first single since sakura's departure, was released with yukihiro listed as a supporting member. Not long after the release of the single, yukihiro was signed on as the official drummer for L'Arc~en~Ciel and the band was finally whole again.
L'Arc~en~Ciel released three more albums of new material during the next few years. ark and ray were released simultaneously on July 1, 1999, and became the first Japanese albums to be released simultaneously in many other Asian countries. Both topped the Oricon music charts, with ark occupying number one and ray at number two. The release of ark and ray marked the high point of the band's career, with each selling over two million copies. REAL followed in 2000, which was the last CD of new material for some time, although many more compilation and remix albums would follow. L'Arc~en~Ciel's last new song before their hiatus, "Spirit dreams inside", was the closing theme song to the movie Final Fantasy: The Spirits Within.
After "Spirit dreams inside", the band went on a hiatus as the members began working on various solo projects. hyde released two solo albums (Roentgen and 666 as HYDE) and starred in the movie Moon Child with the popular Japanese soloist Gackt. hyde also played the part of Adam in the movie Kagen no Tsuki, based on the manga by the same title. Ken founded Sons of All Pussys with L'Arc~en~Ciel's former drummer sakura. tetsu started TETSU69 and yukihiro sang with Acid Android. The popular compilation, Clicked Singles Best 13 was released in 2001, with twelve favorites chosen by fans online and an additional thirteenth song, "Anemone", the band's only new material during this span of years. The members' various solo projects fueled speculation that L'Arc~en~Ciel was going to disband.
In June 2003, L'Arc~en~Ciel surprised the world with a series of seven concerts in Tokyo called the "Shibuya Seven Days", during which they announced a new album for release the following year. The band came out with "READY STEADY GO" In February 2004, its first single in more than three years. It topped Oricon charts and was used as an opening for popular anime series, Fullmetal Alchemist. The single was followed by another chart-topper, "瞳の住人" ("Hitomi no Juunin"), in early March. Finally, the long-awaited new album, SMILE, was released on March 31. Shortly afterwards, on June 2, 2004, the single 自由への招待 ("Jiyuu e no Shoutai") introduced "P'UNK~EN~CIEL" ,a partial change (much like the former gag, D'ARK~EN~CIEL), for the first time on CD with "milky way". In the past, the band also played a P'unk version of "Round and Round" live.
On July 31, 2004, L'Arc~en~Ciel made their North American concert debut at anime convention Otakon, held annually in Baltimore, Maryland. Approximately 12,000 people attended the concert, which was held at an outside venue for the first time in Otakon's musical guest history, at 1st Mariner Arena located near the Baltimore Convention Center where the convention is held.
In 2005, the band released various singles, including "Killing Me" , "New World", and "Jojoushi". These were later featured on their latest album, AWAKE, which was released on June 22 with twelve tracks, including "LOST HEAVEN", the closing theme for Fullmetal Alchemist movie. The band's latest single, "Link", released on July 20, 2005, was also featured in the movie as the opening theme, but has not appeared on an album yet.
In August of 2005, the band went on their AWAKE tour, which was limited to Japan. The tour featured displays of anti-war sentiment, reflecting similar lyrics of the songs of the album. A particularly memorable moment was the unfurling of a giant white flag during NEO UNIVERSE. The flag was decorated with the universal symbol for peace. Other memorable moments included a suspended woman and acrobatics during the performance of Ophelia
hyde's costuming for the concerts raised controversy among fans, and proved to be much removed from L'Arc~en~Ciel's earlier visual kei days. The neo-Nazi uniform and the papal robes during the performance of REVELATION were blatant social commentaries not seen before in the band's concerts. One theory is that the band was commenting on the election of German Joseph Ratzinger (now Pope Benedict XVI) to the head of the Roman Catholic church amid inquiries into his involvement with Nazi Germany and the Hitler Youth.
An opposing theory, supported by hyde's new solo album, FAITH, points to his increased interest in religion and states that his shredding and distribution of the peace flag in papal attire symbolizes the spreading of peace by Catholicism; however, the flag itself was black and proves a significant contrast to the white flag, later unfurled during NEO UNIVERSE. Thus, the true meaning behind the military uniform and even more perplexing papal robes remains a mystery, but it seems most likely that the new socially-aware face of Laruku is being spear-headed by hyde.
The Japanese AWAKE tour was followed by the "ASIA LIVE 2005" tour, with performances in Korea (Seoul) and China (Shanghai), closing with concerts in Japan. Japan's two concerts took place at the famed Tokyo Dome.
Following the AWAKE and ASIALIVE tours, L'Arc~en~Ciel's members turned their attentions back to their solo projects. tetsu began recording with a new band Creature Creature. yukihiro rejoined acid android, which released their newest single "Let's Dance" on 2006/04/05. acid android joins MUCC, another Japanese rock band, to perform two concerts in China (Shanghai) in April of 2006.
HYDE composed the music for "Glamorous Sky", theme song to the much anticipated, manga-adapted film, NANA which stars Mika Nakashima, a j-pop singer (released 2005/08/31), a landmark step for the vocalist, being the first time that he has composed music for another artist. His most recent solo singles are "COUNTDOWN", the ending song for the Japanese release of American movie Stealth (released 2005/10/05), and "SEASON'S CALL", the opening song of new hit anime Blood+ (released 2006/02/22). Both singles topped at #1 on the Oricon chart. HYDE's next solo album "FAITH" was released in Japan 2006/04/26 accompanied by a five month tour throughout Japan between April and August, 2006. After signing on with Tofu Records, four small concerts were scheduled in San Francisco and Anaheim, California in the United States. HYDE will make his U.S. debut in July of 2006, the first of L'Arc~en~Ciel's solo projects to extend internationally.
On November 25th & 26th, 2006, L'Arc~en~Ciel played 2 shows at the Tokyo Dome to celebrate their 15th Anniversary. A poll was created on the official website during the weeks up to the concert to allow fans to pick which songs they would like to hear at the event.