Neoadjuvant chemoradiation therapy (CRT) is the preferred treatment option for distal rectal cancer. Complete pathological response after CRT has led to the proposal of nonoperative approach as an alternative treatment for highly selected patients with complete clinical response. However, patterns of failure following this strategy remains undetermined. Three hundred sixty-one patients with distal rectal cancer were managed by neoadjuvant CRT including 5-FU, leucovorin, and 5040 cGy. Tumor response assessment was performed at 8 weeks following CRT. Patients with complete clinical response were not immediately operated on and were closely followed. One hundred twenty-two patients were considered to have complete clinical response after the first tumor response assessment. Of these, only 99 patients sustained complete clinical response for at least 12 months and were considered stage c0 (27.4%) and managed nonoperatively. Mean follow-up was 59.9 months. There were 13 (13.1%) recurrences: 5 (5%) endorectal, 7 (7.1%) systemic, and 1 (1%) combined recurrence. All 5 isolated endorectal recurrences were salvaged. Mean recurrence interval was 52 months for local failure and 29.5 months for systemic failure. There were five cancer-related deaths after systemic recurrences. Overall and disease-free 5-year survivals were 93% and 85%. Even though surgery remains the standard treatment for rectal cancer, nonoperative treatment after complete clinical response following neoadjuvant CRT may be safe and associated with good survival rates in a highly selected group of patients. Survival in these patients is significantly affected by systemic failure. Exclusive local failure occurs late after CRT completion and is frequently amenable to salvage therapy.