On May 21, 2003, Aiken came in a close second to Ruben Studdard, who won the contest by 134,000 votes out of more than 24,000,000 votes cast. The result was controversial, as some hypothesized that Idol's voting system was incapable of handling the number of attempted calls. In an interview prior to the start of the fifth season of American Idol, Executive Producer Nigel Lythgoe revealed for the first time that Aiken had led the fan voting every week from the Wild Card week to the finale, when the possibly-random voting result gave Studdard the win. Though officially, Aiken was the show's "first runner-up," he has since gone on to be the second season's best-selling star.

Rolling Stone featured Aiken on the cover of their July 2003 issue. In the cover article Aiken said, "One thing I've found of people in the public eye, either you're a womanizer or you've got to be gay. Since I'm neither one of those, people are completely concerned about me." In subsequent interviews he expressed frustration over continued questions about his sexual orientation, telling People magazine in 2006, "It doesn't matter what I say. People are going to believe what they want."

Aiken made a surprise appearance on the final show of American Idol season 5, when failed auditioner Michael Sandecki returned to the show to receive a "Golden Idol" award for Best Impersonator for his Clay Aiken-like appearance. Aiken appeared without introduction in a well-tailored designer suit and longer, darker hair with bangs, looking so different that many did not recognize him until he began to sing "Don't Let the Sun Go Down on Me." The second season of the American Idol Rewind series (2007) was narrated by Aiken.

On October 14, 2003, Aiken released his first solo album, Measure of a Man, which debuted at #1 on the Billboard 200 and was, with 613,000 copies sold in its first week, the highest-selling debut for a solo artist in 10 years, and to date the highest debut of any Idol. The album received RIAA Double Platinum certification on November 17, 2003 (a Double Platinum plaque was presented to Aiken by Clive Davis on October 22, 2003, during Good Morning America). The album spawned both the hit single "Invisible" and his first hit song, "This Is the Night" (both co-written by British songwriter Chris Braide). Later that year, Aiken won the Fan's Choice Award at the American Music Awards ceremony, and his CD single "This Is the Night/Bridge Over Troubled Water" won the Billboard award for the Best-Selling Single of 2003.

On November 16, 2004, Aiken released a holiday album titled Merry Christmas with Love, which set a new record for fastest-selling holiday album in the Soundscan era (since 1991). The album debuted at #4 on the Billboard 200 and tied Céline Dion's record for the highest debut by a holiday album in the history of Billboard magazine. Merry Christmas with Love sold over 1,000,000 copies retail in 6 weeks and was the best-selling holiday album of 2004, receiving RIAA Platinum certification on Jan. 6, 2005.

Aiken's second studio album, A Thousand Different Ways, was released September 19, 2006. He worked on the album under the guidance of Canadian producer and A&R executive Jaymes Foster. The album contains ten cover songs and four new songs, one of which Aiken co-wrote. Clive Davis is credited with the cover concept. One additional song, "Lover All Alone", written by Aiken and David Foster, is included with the album on iTunes. Debuting at #2 on the Billboard chart, A Thousand Different Ways made Aiken the fourth artist ever to have his first three albums debut in the Top 5 and scan over 200,000 in the first week.

Aiken's second Christmas album, All Is Well (an EP of four Christmas songs), was released exclusively to Walmart on November 28, 2006, and was released to iTunes as a digital download in December 2007.

Aiken stated in an April 2007 interview with People that he was planning a new album, and during his May 2007 appearance on Jimmy Kimmel Live, he mentioned that he was in Los Angeles interviewing producers for the new album. Aiken found a song, "On My Way Here", written by OneRepublic frontman Ryan Tedder, that struck a chord with him and became the inspiration for the album's theme in addition to the album title. For a cohesive sound, Aiken chose Mark 'Kipper' Eldridge to produce the entire album. On My Way Here was released May 6, 2008 on the RCA label.

According to an article posted on Billboard, Aiken and RCA parted ways shortly after his On My Way Here album was released. Aiken's rep confirmed to People magazine that Aiken left RCA. Stated in the cited People article, "The buzz about Aiken's exit was fueled earlier this week when his picture disappeared online and Billboard, citing unnamed sources, reported Friday that Aiken, 30, had been dropped by the label. According to Billboard, Aiken’s 2008 album “On My Way Here” sold just 159,000 copies in the U.S., compared to his 2003 debut album, “Measure of a Man,” which sold 2.78 million copies".