In April 1911 the Australian Government held an international competition to produce a design for Canberra, its new capital city. Griffin produced a design with impressive renderings of the plan produced by his wife. They first heard about the competition in July, while on honeymoon, and worked feverishly to prepare the plans. On May 23, 1912, Griffin's design was selected as the winner from among 137 entries.
Griffin and his wife Marion joined the Naturalists’ Society of New South Wales in 1914, where they enjoyed organised bush walks and field studies. The Society facilitated their contact with the Australian scientific community, especially botanists. This appreciation for Australia flora was reflected in Griffin's 1914 town plan for Leeton in the Murrumbidgee Irrigation Area, and later in a design for Newman College at the University of Melbourne. He also utilised Australian flora botanical names as places names for suburbs and streets in Canberra, such as Grevillea Park, Telopea Park, Clienthus Circle and Blandfordia.
Griffin was offered the position of head of the department of architecture at the University of Illinois. At the same time he was negotiating a three-year contract with the Australian Government to remain in Australia and oversee the implementation of his plan, which he felt had already been compromised. He was appointed the Federal Capital Director of Design and Construction. In this role, Griffin oversaw the design of North and South Canberra, though he struggled with political and bureaucratic obstacles. With the outbreak of World War I in 1914, Griffin was under pressure to reduce the scope and scale of his plans due to the Government diverting funds towards the war effort. Several parts of his basic design underwent change. Plans to create Westbourne, Southbourne and Eastbourne Avenues to complement Canberra's Northbourne Avenue were eliminated, as did a proposed railway connecting South Canberra to North Canberra, and then in a northwesterly direction to Yass. A market area that would have been at Russell Hill in North Canberra was moved south to what is now Fyshwick, next to South Canberra.
Many of Griffin's design ideas were attacked by both the architectural profession and the press. In 1917 a Royal Commission determined that they had undermined Griffin's authority by supplying him with false data which he had used to carry out his work. Ultimately, Griffin resigned from the Canberra design project in December 1920 when he discovered that several of these bureaucrats had been appointed to an agency that would oversee Canberra's construction. The Commonwealth Government under the leadership of Prime Minister Hughes had removed Griffin as director of construction at Canberra after disagreements over his supervisory role, and in 1921 created the Federal Capital Advisory Committee, with John Sulman as chair. Griffin was offered membership, but declined and withdrew from further activity in Canberra.