British films secured a record one-third share of UK cinema takings totalling £770m last year.
The latest Harry Potter movie topped the UK box office
Harry Potter and the Goblet of Fire led the way as the top-grossing British film, taking $808m (£435m) worldwide, a report by the UK Film Council said.
It was one of eight UK films to feature among the 20 highest earners at the British box office, the council said.
One in four people went to the cinema once a month and the numbers watching foreign language films also increased.
The UK Film Council said more than 200 foreign language films in 32 different languages were shown at UK cinemas.
The most popular was the German-made Downfall, about the last days of Adolf Hitler.
Overall, comedies were the most popular films, followed by fantasy films and dramas.
TOP 2005 UK FILMS WORLDWIDE
Harry Potter and the Goblet of Fire - $808m (£435m)
Charlie and the Chocolate Factory - $472m (£254m)
Batman Begins - $371m (£200m)
Kingdom of Heaven - $210m (£113m)
Wallace & Gromit: The Curse of the Were-Rabbit - $183m (£98m)
Among the eight UK films featuring in the top 20 were Charlie and the Chocolate Factory, Wallace and Gromit: The Curse of the Were-Rabbit, Nanny McPhee, The Hitchhiker's Guide to the Galaxy and Pride and Prejudice.
John Woodward, chief executive officer of the UK Film Council, said: "The figures show that the public love British films and 2005 was a great year for British films at the cinema with the largest slice of box office takings since records began.
"This British success story was replicated around the globe with over $3bn (£1.6bn) taken worldwide, a real achievement when you consider the slump that affected most other countries."
Worldwide cinema takings fell by 9% in 2005, according to the Motion Picture Association of America (MPAA).
Culture Secretary Tessa Jowell, who has unveiled tax incentives aimed at bringing filmmakers to the UK, said: "Harry Potter, Nanny McPhee and Willy Wonka have all been hits at home and abroad - helping us achieve great success at the box office.
"I hope that next year, buoyed by the new tax incentive, the UK film industry will be in even better health."
The top 20 performing UK films grossed $3.3bn (£1.8bn) worldwide with a market share of 14.3% and were seen by 600 million people, compared with takings of $2.6bn (£1.4bn) and a share of 10.3% in 2004.
Films are classed as UK-made if they are shot in the country, involve UK talent in front of and behind the camera and invest money in the UK or on British staff and services.