The Jam spent much of the next two years touring. They were not very successful with their U.S. shows, for some of which they were the opening act for arena-rockers Blue Öyster Cult, but they did better with their UK performances. As they went back into the studio to record a third album of primarily Foxton contributions, the songs were dismissed by producers as poor and held off recording an album in hopes that Weller would once again find inspiration.

Returning to his hometown of Woking, Weller spent much of his time listening to albums by The Kinks and coming up with new songs. They released their next single, the double A-side "David Watts" b/w "'A' Bomb In Wardour Street". "David Watts" was a cover of the bouncy Kinks' classic; Weller and Foxton trade lead vocals throughout the song. "'A' Bomb In Wardour Street" was a Weller original. One of their hardest and most tense tracks, Weller venomously spat out lines cursing the violent thugs that now plagued the punk scene over a taut two-chord figure. The single, and "'A' Bomb" in particular, was hailed as a return to form and became their most successful 7" since "All Around The World".

It wasn't until their next single, "Down In The Tube Station At Midnight", that The Jam erased doubts from critics' minds. "Tube Station", an intricate first-person tale in which the narrator gets beaten, presumably to death, by thugs who "smelled of pubs and Wormwood Scrubs and too many right-wing meetings", was a story seemingly ripped from contemporary headlines of skinhead violence. Alternating quiet verses and loud choruses and propelled by Foxton's tense bassline, "Tube Station" again channels the atmosphere of fear and violence that was afflicting Britain in the late '70s. Had it not had a myopic BBC airplay ban slapped on it, allegedly for promoting thuggery, it likely would have become the Jam's first top 10 hit in the UK.

Aside from Weller's markedly more mature and sophisticated songwriting, another key shift in the group's sound was introduced by Foxton's adoption of the Fender Precision Bass after the recording of This Is the Modern World.The P-Bass did not have the mod image of Bruce's old Rickenbacker, but it gave his melodic basslines a fuller, richer sound evocative of the most famous purveyor of the P-Bass, Motown's James Jamerson. A richer tone for Bruce was necessary for the group's progression as he carried the melody much of the time.

The Jam released their third LP, All Mod Cons in 1978. The band was able to disguise the arduous process of creating the album by including three previously released tracks among the twelve in total: "David Watts", "'A' Bomb In Wardour Street", and "Down In The Tube Station At Midnight". (It also contained two songs Polydor had previously rejected for single release, the manic "Billy Hunt" and the acoustic ballad "English Rose".) Despite having only nine all-new songs, All Mod Cons is considered by many to be the band's masterpiece.