"People singing and dancing on film when it's right is wonderful to watch," says the writer-director, whose new musical comedy drama , Begin Again, opens next week.
Set in New York, Begin Again stars Keira Knightley and Mark Ruffalo as a fresh from London singer-songwriter and a burned out A&R man whose worlds collide when she is dumped by her boyfriend (played by Maroon 5's Adam Levine), and he is kicked to the kerb by his record company.
It is Carney's first musical since 2006's Once, a two hander set in Dublin about an Irish busker and a Czech migrant.
"I wanted to wait until I had accumulated a story to tell," says Carney of the six-year gap between musicals.
"I didn't feel I had anything particularly pressing so I went off and made a couple of smaller Irish films on my own, as I'd always done, some videos, sketches, bits and pieces, then the time felt right to jump into another musical story."
Once will be a hard act to follow. The film that was made for relative coppers (under £100,000) turned out to be an international hit.
From being spotted at Sundance it went on to win an Independent Spirit Award, a Grammy nomination, and an Oscar for best original song.
"You never expect those things to really happen to that degree," says the 42-year-old Dubliner.
"Anybody who tells you that they planned those things is lying or showing off."
Once was the perfect first single when it came to attracting talent to Begin Again.
The cast, which also includes CeeLo Green, Mos Def, and James Corden, knew the film, as did Judd Apatow, one of Hollywood's prime players who joined Begin Again as a producer after commissioning a script.
"He had seen Once and liked it, so I went to meet him and he asked me what I was doing next.
"He seemed very interested in that idea for a story, he liked the world of the music business it was set in, and we took it from there.
"He was very involved in the story, the structure and the characters, character development and so on, he's very good on that stuff and extremely experienced."
The story involves Ruffalo and Knightley's characters deciding, in the great tradition of musicals, to "do the show right here" and make an album on the streets of New York.
They were streets Carney got to know well during his sojourn in the city.
He would cycle around to scout locations, on one occasion getting to know the streets a little too intimately when he fell off on the Lower East Side.
"I had a bruised rib for a while, but I lived to fight another day," he said.
Though he had more money this time, Carney was determined to keep the same lo-fi vibe that had endeared Once to audiences.
"We did have more money but not an exorbitant amount, not so much that I had to fake the atmosphere on set. We definitely carried through the same sort of spirit of Once. I hope it doesn't look like I got too much money and went a bit Hollywood or anything like that. I don't think it does."
Once stood out because it was a reinvention of a genre. Save for the odd exception - such as Billy Elliot - the musical's time was considered long gone. Carney, who had been a bass player in The Frames, believed he knew how to revive it: by stealth. He wanted songs and drama to fit so smoothly together that audiences would naturally go along for the ride. Audiences like to be surprised, he reckons.
"From the word go on Once my hope was to try to make a film that looked like an indie, that looked like a Mike Leigh film or a Linklater movie, something that felt natural and organic but really had the beats and structure of an old Hollywood musical in some shape or form." Ruffalo, who plays guitar in the film while Knightley sings, believes he has succeeded, calling Carney "the John Cassavetes of cinematic musicals".
Carney does not miss being in a band, but he still plays music. "I've exorcised whatever part of me needed that band thing through making these last few films. I would have no desire to be back up [on stage]." And he still has strong views on music and what constitutes a real band. When talk turns to One Direction, for instance, he says: "The fact that One Direction are the biggest band in the world at the moment is pretty telling. And pretty depressing."
For his next movie he is working with Bono and The Edge on Sing Street. The tale of a young Dubliner taking his band to London is due for release next year. Carney moved to Los Angeles for a while, but he is happy being back in Dublin.
"It's a funny town," he says of LA. "They kind of appreciate you more when you are not there."
Begin Again opens in cinemas on July 11