Hanlon has served as the assistant coach for both the Canucks and Washington Capitals before becoming the head coach of the American Hockey League's Portland Pirates and then the Capitals. After a miserable start to the 2003–04 season, Capitals general manager George McPhee fired head coach Bruce Cassidy and promoted assistant Hanlon to head coaching duties. The Capitals went 15–30–9 under Hanlon to finish the year. Led by 2004 first-round pick Alexander Ovechkin, the Capitals were expected to improve; however the team was still young and compiled a record of 29–41–12. Despite this, Hanlon was guaranteed one more year as coach of the Capitals. In 2005, he was assigned to coach the Belarus hockey team. He led the team to 10th place at the 2005 Men's World Ice Hockey Championships, and to historic high sixth place at the 2006 Men's World Ice Hockey Championships. He was named "sports man of the year" by major Belarusian sports newspaper "Прессбол" in 2006. The 2006–07 Capitals compiled an 8–5–4 mark by the end of November, though long losing streaks eliminated the Caps' chances of making the post-season, as they finished 28–40–14.