On the January 29 episode of Raw, Michaels captured the World Tag Team Championship with WWE Champion John Cena after defeating Rated-RKO. He then defeated both Edge and Orton in a Triple Threat number one contender’s match on another episode of Raw to earn a shot at the WWE championship. At WrestleMania 23, Cena retained the championship, after he made Michaels submit to the STFU. The next night on Raw, Michaels and Cena competed in two back-to-back ten team battle royals, winning the first and losing the titles in the second to The Hardys (Matt and Jeff) when Michaels threw Cena over the top rope. Michaels’ feud with Cena continued and he faced off with Cena, Edge and Randy Orton in a standard wrestling match involving four wrestlers at Backlash for the WWE championship. Cena retained the championship when Michaels performed Sweet Chin Music on Cena causing him to fall on Orton, which gained Cena the pinfall.
Michaels then entered a feud with Randy Orton when Orton claimed that he could beat Michaels. The week before their scheduled match at Judgment Day, after Michaels won a match against Edge, Orton interfered, punting Michaels in the head, this kick sees the wrestler take a run up to a kneeling opponent and strike him in the head with the sole of his foot. Orton assaulted Michaels again, just prior to their match at Judgment Day, interrupting Michaels’ interview segment. Michaels collapsed during the course of their match, causing Orton to win by referee stoppage. Afterwards, Orton continued the beating, when he performed a jumping cutter to a fallen Michaels. Michaels was then removed out of the ring in a stretcher. During the feud, Michaels conjured a storyline concussion. This injury was used to keep Michaels out of action, as he required surgery for his knee. Michaels made his return on the October 8 episode of Raw, performing a superkick to newly-crowned WWE Champion, Orton, during his title ceremony at the end of the show and then celebrating over the knocked-out champion as Vince McMahon watched. At Cyber Sunday, Michaels was voted by the fans to face Orton for the WWE Championship; though he won via disqualification when Orton hit Michaels with a low blow, which resulted in Orton retaining the championship. Michaels got another opportunity at the WWE championship, when he was granted his rematch against Orton at Survivor Series. In their match, Michaels was banned from using Sweet Chin Music upon request by Orton, referring to as Michaels superkicking Orton week after week. Michaels lost the match, when Orton performed a RKO for the win.
As part of the storyline involving Ric Flair, Michaels faced Flair in a Career Threatening match at WrestleMania XXIV, in which he won by performing Sweet Chin Music and thus ending Flair’s career. Afterwards, Batista confronted Michaels about his actions at WrestleMania, calling him selfish and egotistical. The two faced off at Backlash with Chris Jericho as the guest referee. Michaels won after faking a knee injury and performing Sweet Chin Music. Jericho then confronted Michaels on this matter, in which Michaels admitted to faking the injury in order to defeat Batista. Michaels then defeated Jericho at Judgment Day. At One Night Stand, Michaels lost to Batista in a stretcher match, a match where the objective is to place the opponent on a stretcher at ringside and move it across a line located on the entrance ramp, thus ending their feud. On the June 9 episode of Raw, Michaels was attacked by Chris Jericho during his talk show segment, The Highlight Reel, being thrown directly through a television screen. The following week, it was revealed that, within the context of the storyline, Michaels had suffered a detached retina. At The Great American Bash, a match between Michaels and Jericho was scheduled, in which Jericho assaulted Michaels’ eye, which caused Jericho to win by referee stoppage. A month later at SummerSlam, Michaels was scripted to announce his retirement from professional wrestling, though the staged rivalry between Jericho and himself continued after Jericho punched Michaels’ wife in the face. On the August 25 episode of Raw, Michaels denounced his decision to retire and challenged Jericho to an unsanctioned match at Unforgiven, which Jericho accepted. The following week, Michaels and Jericho held a scripted official contract signing for the unsanctioned match. During the contract signing, a confrontation with Jericho occurred. A predicament ensued when Michaels suffered a small tear on his left triceps, though Michaels was medically cleared to compete in the match. At Unforgiven, Michaels defeated Jericho, after the referee stopped the match, due to the severity of the beating Michaels was giving Jericho. It was at the same September event that Jericho replaced CM Punk in the World Heavyweight Championship scramble match, which saw him win the match and become World champion. The following month at No Mercy, Michaels met Jericho in a ladder match in which Jericho defended the World title against Michaels. At the event Jericho defeated Michaels to retain the title.
In December 2008, Michaels accepted an offer to become an employee of John “Bradshaw” Layfield (JBL). The storyline was that Michaels had lost his family’s personal savings due to the global recession, forcing him to accept JBL’s offer of employment. After failing to secure JBL the World Heavyweight Championship against John Cena at the Royal Rumble, Michaels agreed to take part in an “All or Nothing” match at No Way Out in February. Michaels won the match, letting Michaels out of his one-year contract with JBL immediately while still receiving full payment.