Combined-modality therapy consisting of surgery, radiotherapy, and chemotherapy is the recommended management strategy for patients with stage II and III rectal cancer. Adjuvant radiotherapy has been used to improve upon the historically high pelvic recurrence rates. Both preoperative and postoperative radiation treatment strategies have been extensively studied. However, the recently published 5-year results of the randomized German CAO/ARO/AIO 94 trial of preoperative vs. postoperative chemoradiotherapy support a standard preoperative treatment approach. Randomized trials have also demonstrated that the addition of chemotherapy to preoperative radiotherapy significantly enhances tumor downstaging, pathologic response, and local control over radiation alone. The role of concurrent preoperative chemoradiotherapy, the investigation of novel systemic and biologic agents (capecitabine, oxaliplatin, irinotecan, bevacizumab, and cetuximab) and other key issues in the preoperative treatment of localized rectal cancer are discussed.