Panday debuted his acting career with the 1987 multi-starer film Aag Hi Aag opposite Neelam Kothari. Film producer Pahlaj Nihalani gave Panday his first break in 1987 by signing him up for two films, his debut film and Paap Ki Duniya. His second successful film was Paap Ki Duniya with Sunny Deol and Neelam. Subsequently, Panday appeared in many multi-hero films from 1987 to 1993. In 1988, Panday was appreciated for his supporting role in N. Chandra's film Tezaab featuring Anil Kapoor and Madhuri Dixit. Panday played the character of Babban, Munna's (Anil Kapoor) friend.[9] For his performance in Tezaab, Panday was nominated for the Filmfare Award for the Best Supporting Actor.
The advent of the 1990s saw a new wave of actors like Aamir Khan, Salman Khan and Shah Rukh Khan taking on roles as "romantic heroes", while Akshay Kumar, Suniel Shetty and Ajay Devgan grabbed the "action hero" roles, whereas Sunny Deol and Govinda remained established actors. Panday found it difficult to slot himself in either category. In addition, by the late nineties, solo-hero films were back in vogue instead of the multi-hero films in which Panday was generally cast and Panday was not seen as a marketable hero for solo hero films.[citation needed]
Panday grew increasingly tired of playing second fiddle to more prominent actors, but had difficulty being seen as marketable, other than supporting household names. "I was offered hero ke bhai ka (lead actor's brother) roles," he said. "I (told them), 'Boss, not happening.'"[10] Due to a lack of work in Bollywood, he moved to act as hero in Bangladesh films. In 1995, he was offered his first films as the lead hero in Bangladeshi films. He acted in six films between 1995 and 1997 as hero in Bangladesh and all of them were successful.[11] Between 1997 and 2002, he received minimal work in Bollywood, playing supporting roles in low-budget films like Tirchhi Topiwale, Yeh Hai Mumbai Meri Jaan, Kaun Rokega Mujhe and Jwalamukhi.
Between the years of 2006 to 2010, Panday would star in small comedic roles, settling into a reputation of being comic relief. The role that earned him the most success was playing the character of Indo-Italian "Aakhiri Pasta" in the 2010 comedy hit Housefull. His catchphrase from the movie that is often quoted is an accented "I'm-a joking!" His role was so memorable that he reprised the role in the sequels Housefull 2 in 2012, Housefull 3 in 2016 and in Housefull 4 in 2019.
In regards to his film selection since returning to acting in Bollywood, Panday has stated that he prefers not to play a hero nowadays because there is less pressure on him if the film fails and it's much more fun playing interesting characters and showing his range.[12]
While Panday's second stint in Bollywood has mainly consisted of starring as a character actor, he doesn't want to be pigeonholed into only doing comic roles. "I don't think I am restricting myself to doing only comedy. I am hoping that someone offers me something else. It requires a lot of guts for someone to cast me in something else. I am just hoping that someone sees something else in me other than comedy."[13]