At some point Moody retired from active service, though by this time he was considered the greatest Auror of all time. In addition, he took Nymphadora Tonks as his protege.

Mad-Eye captured Igor Karkaroff some time after 1981, and the Death Eater was sent to Azkaban, until Karkaroff gave up the names of a number of his fellow Death Eaters in exchange for a lighter sentence. Moody was present at Karkaroff's trial, where he made his dislike of the defector very clear, when the former Death Eater mentioned the names of Antonin Dolohov, Evan Rosier (killed by Moody personally, though at the cost of part of his nose), Travers, Mulciber, and Severus Snape, all of whom seemed to have already either been killed, captured, or defected, until he called the name of Augustus Rookwood. Rookwood was an Unspeakable, and a double-agent, spying on the Ministry for Voldemort. This was news to the Ministry, but Karkaroff was sent back to Azkaban, pending a review into Rookwood's case; when Karkaroff's allegations proved true, he was released, and went on to take the position of Headmaster of Durmstrang Institute.