As the University of Lisbon's first professor of neurology (1911–44), Egas Moniz introduced and developed (1927–37) cerebral angiography (arteriography), a method of making visible the blood vessels of the brain by injecting into the carotid artery substances that are opaque to X rays. This technique has proved to be of considerable value in the diagnosis of intracranial diseases such as tumours of the pituitary gland.

Egas Moniz observed that certain psychoses, particularly schizophrenia and severe paranoia, involve recurrent thought patterns that dominate normal psychological processes. He reasoned that severing the nerve fibres between the frontal lobes, which are known to be closely associated with psychological responses, and the thalamus (a relay centre for sensory impulses at the centre of the brain) might force a transformation of existing thought patterns into more normal ones. In 1936 he and his associate, Almeida Lima, performed the operation known as a prefrontal leucotomy (lobotomy). The operation, though successful in eliminating the symptoms of persons suffering from apparently incurable psychoses, is now known to have serious side effects, and Egas Moniz cautioned that it was a radical procedure to be followed only after all other forms of treatment had proved to be ineffective. The use of lobotomies spread in the 1940s and '50s and then declined owing to the use of tranquilizing drugs as a means to quiet agitated or distressed patients.

Egas Moniz was also active politically. He served several times between 1903 and 1917 in the Portuguese chamber of deputies, was Portuguese minister at Madrid (1917–18), and led the Portuguese delegation at the Paris Peace Conference (1918–19).