Despite his failure in the world of theater, the experience of writing plays permanently affected Henry's writing. His writing during the later 1890's became primarily about scene and setting, about movement and action, instead of primarily about character. He developed what is called his "scenic progression" technique, where the reader follows the thoughts of the subject: a precursor to the "stream of consciousness" style used by many writers of the next generation. During this period, Henry wrote what probably remains his best-known (and most critiqued) tale, The Turn of the Screw as well as several other novels and stories revolving around the idea of childhood innocence, such as What Maisie Knew and The Awkward Age.

In 1896, Henry finally grew tired of London and decided to move to Rye, in Sussex. He leased and then bought an 18th century brick home called "Lamb House," not far from the homes of Joseph Conrad and H.G. Wells. He would live here for the remaining 20 years of his life, and would write the rest of his novels and stories here. Between 1896 and 1904, Henry turned out an amazing number of work, including three major novels between 1902 and 1904.

In 1904, Henry again decided to travel to the United States. He traveled extensively up the east coast, and then made the cross-country trip to California. To pay his way, he gave lectures, usually about Balzac. Interestingly enough, he was deeply uninterested in was he saw and eagerly to returned to England in 1907.

The years which followed were ones of disappointment for Henry. Although never hugely popular, his books had predominantly merited critical success, and as much commercial success as one could wish for high-brow literature. Despite this, the 1907 issuing of the twenty-four volume work The Novels and Tales of Henry James sold pitifully, leaving him with little income. To compound his misery, the last living member of his immediate family, William, died in 1910. After publishing his last novel, The Outcry to poor reviews, he began writing his autobiography.

Ironically, the major awards conferred on him during his life came after the peak of his career. He received an honorary degree from Harvard in 1911, and one from Oxford in 1912. Henry's good friend Edith Wharton campaigned to win him a Nobel Peace Prize, but that came to naught.

The outbreak of World War I caused Henry considerable consternation. Now over 70, he found it very difficult to travel between Rye and London as he was a foreign citizen and needed special permits. This convinced him to finally become a naturalized British citizen, which he officially did on July 28, 1915.

Slightly more than 4 months alter, on December 2, 1915, Henry suffered a series of strokes. His friends banded together for a final tribute, and convinced King George V to award Henry the Order of Merit, which he did on January 1, 1916. Henry lived, sliding in and out of coherency, until February 28, 1916 when pneumonia finally claimed him. He was cremated, and his ashes were taken back to Cambridge, while a plaque was posted in a cemetery in Chelsea, England.