On June 3, 2010, IU released "Nagging", a duet with 2AM's Lim Seul-ong. The single debuted at twelve on the Gaon Digital Chart and shot up to the number-one position the following week, where it remained for three weeks. Written by Kim Eana and composed by Lee Min-soo, the pop ballad duet was used as one of the theme songs for the second season of the variety show We Got Married. Soon after, IU released "Because I'm a Woman" (여자라서), one of the theme songs of MBC's historical drama, Road No. 1. The song peaked at number six on the Gaon Digital Chart. IU's collaboration with Sung Si-kyung on "It's You" (그대네요) for his album, The First, debuted at number one on the Gaon Digital Chart. On October 6, 2010, she released the theme song "My Dream Patissiere" for the Korean dub of Yumeiro Patissiere.

IU's third EP, Real, was released on December 9, 2010. Produced by Jo Yeong-cheol and Choi Gap-won, Real debuted at number four on the Gaon Album Chart. The lead single, "Good Day", reunited IU with lyricist Kim Eana and composer Lee Min-soo after "Nagging", whom she would work with again on the lead singles of her next two studio albums. The uptempo song, as explained by Kim Eana, is about "a shy girl who is nervous about expressing her feelings to the boy she likes." During the album's promotional period, IU also topped the charts on the music programs M Countdown, Music Bank, and Inkigayo. Both Kim Eana and Lee Min-soo considered the main factors of the song's success to be the use of the word oppa (오빠) in the chorus, as well as the three high-pitched notes that IU sings in semitone increments during the climax of the song. In addition to receiving praise for her vocal abilities, IU's fan base also expanded to a more varied demographic as compared to other K-pop groups. Billboard magazine ranked "Good Day" at number one on their list "100 Greatest K-pop Songs of the 2010s".

To maintain public visibility, IU joined the cast of the variety show Heroes, which aired from July 18, 2010, to May 1, 2011. Shortly after, IU was cast in teen drama Dream High. Filming ran from December 2010 to February 2011, during which time she remained committed to Heroes and her existing promotions for "Good Day". In her first acting role, IU played Kim Pil-sook, a shy and overweight school girl who dreams of becoming a professional singer. Admitting that she was doubtful about her readiness to take on acting, IU remarked that she gained confidence in learning that the part would require singing and would later describe the experience as a tremendously enjoyable one. For the series' soundtrack, she released the single, "Someday", which achieved number-one position on the Gaon Digital Chart on the week of January 30 – February 5, 2011. By the end of 2011, the single had sold 2,209,924 digital copies and is one of IU's best-selling singles for a soundtrack.

A follow-up extended play to Real, Real+, was released on February 16, 2011, containing three songs. The lead single, "Only I Didn't Know" (나만 몰랐던 이야기), was composed by singer-songwriter Yoon Sang with lyrics written by Kim Eana. Yoon Sang wrote the song for IU after spotting her momentary sad expression on a television broadcast. The ballad's tone was a departure from her more recent releases, with IU describing it as dark, sad and sentimental, which is closer to her music preference. The song performed well commercially, debuting at number one on the Gaon Digital Chart.

IU took on various side-projects after the end of Dream High. On March 10, 2011, IU performed as the opening act for British singer-songwriter Corinne Bailey Rae's first solo concert in Seoul with two songs, before joining Bailey Rae during her performance of "Put Your Records On". In the same month, IU was appointed as one of the new hosts of the music program, Inkigayo, a position which she held until July 2013. In May 2011, IU recorded her first self-composed song, "Hold My Hand" (내 손을 잡아), for the romantic-comedy television series, The Greatest Love. The song peaked at number two on the Gaon Digital Chart and sold 2,031,787 digital copies in 2011. Between May and July 2011, IU took part in the reality ice-skating competition series, Kim Yuna's Kiss & Cry, as a celebrity contestant until she was eliminated in the eighth episode. During this time, she also participated in Immortal Songs: Singing the Legend but eventually withdrew after recording one episode due to her overwhelming schedule.

IU's second studio album, Last Fantasy, was released on November 29, 2011. The Korea JoongAng Daily described the album as one that would "suit all kinds of musical tastes and fans", while Billboard noted the "cinematic feel" of the album as set by the opening track, "Secret". Produced by Jo Yeong-cheol, whom IU worked with on Real, the album contains collaborative works with singer-songwriters such as Yoon Sang, Lee Juck and Ra.D. The total number of download sales made from the album's tracks exceeded 10 million within the first two weeks. Eight out of the album's thirteen songs debuted in the top ten on the Gaon Digital Chart, while the album debuted at number one on the Gaon Album Chart. The main single, "You & I", became IU's most commercially successful single with almost 5.5 million digital copies sold by the end of 2012. It topped the Gaon Chart as well as the newly established Billboard K-pop Hot 100 chart at the time of release.

Shortly before the release of Last Fantasy, IU signed with EMI Music Japan (now part of Universal Music Japan) as a precursor to her entry into the Japanese market. A selection of her previously released songs was compiled into an extended play called I□U that was released in Japan on December 14, 2011.