1965 marked the entry of short story writer and novelist, M.T. Vasudevan Nair (affectionately called MT in Kerala) whose writings by nature had a visual orientation. MT was exposed to cinema when he began scripting. Films based on his screenplays had a visual quality unmatched in the rest of the Malayalam films of the time.

MT collaborated with cameraman-turned director, A.Vincent in making 'Murappennu' (Cousin/fiancee) in 1965. Though still theatrical and melodramatic, 'Murappennu' had the advantage of being shot extensively on location and had a strong visual quality. When actors were placed in real locations like river banks, matriarchal family-abodes, gravel paths and paddy fields, they came out with an acting style freed from the theatricality inherent in studio-filming.
          The ultimate in collaborative work happened in 'Chemmeen' (Prawn) in 1966 which won the President's gold medal for the first time for a South Indian film. Based on Thakazhy Sivasankara Pillai's well-known novel of the same name, the film had screenplay by S.L.Puram, camera work by Marcus Bartely, editing by Hrishikesh Mukherji and music by Salil Chaudhury, all established names in the Indian film industry. All these contributed immensely to the overall technical quality of the film. Its high caliber publicity greatly aided by the gold medal secured before its commercial release and its technical flourish made a great impact on the audience. Its director, Ramu Kariat who had a few memorable films to his credit, got national attention with this effort.
          A major landmark in Malayalam cinema was to come in the next year with 'Iruttinde Atmavu' (Soul of Darkness, 1967). With a screenplay by MT, P.Bhaskaran could make one of the best films of his career and also provide Malayalam cinema with a new direction; that of the low budget film. This happened strangely after the success of Chemmeen, the big budget multi star-cast film that got technical assistance from an all -India crew!
          1967 also witnessed the first Malayalam film of a graduate of the film Institute, Pune: P.M.Abdul Aseez's 'Aval' (She). Two years later, another graduate, John Sankaramangalam made 'Janmabhoomi' (Home land) with financial support from the Film Finance Corporation. Shot in Wayanad on the Western Ghats, a pristine location for film making, the film won a Presidential award for its theme of religious co-existence.
          By the end of the sixties, the traditional Malayalam cinema had produced a number of good works, most of them based on reputed literary works by authors like Vaikom Muhammed Basheer, Parappurath, K.T.Muhammed, Thakazhy, Malayattoor Ramakrishnan, P.Kesava Dev and Thoppil Bhasi. The films include Odayil Ninnu, Yakshi, Kadalpalam and Ara Nazhika Neram (all directed by K.S. Sethumadhavan): Mudiyanaya Puthran and Chemmeen (by Ramu Kariat): Iruttinde Atmavu (by P.Bhaskaran): and Bhargavi Nilayam, Thulabharam, Asuravithu and Nagarame Nandi (all by A. Vincent).