The molecular changes in the parenchyma that reflect disturbances in the function of kidney transplants are unknown. We studied the relationships among histopathology, gene expression, and renal function in 146 human kidney transplant biopsies performed for clinical indications. Impaired function (estimated GFR) correlated with tubular atrophy and fibrosis but not with inflammation or rejection. Functional deterioration before biopsy correlated with inflammation and tubulitis and was greater in cases of rejection. Microarray analysis revealed a correlation between impaired renal function and altered expression of sets of transcripts consistent with tissue injury but not with those consistent with cytotoxic T cell infiltration or IFN-gamma effects. Multivariate analysis of clinical variables, histologic lesions, and transcript sets confirmed that expression of injury-related transcript sets independently correlated with renal function. Analysis of individual genes confirmed that the transcripts with the greatest positive or negative correlations with renal function were those suggestive of response to injury and parenchymal dedifferentiation not inflammation. We defined new sets of genes based on individual transcripts that correlated with renal function, and these highly correlated with the previously developed injury sets and with atrophy and fibrosis. Thus, in biopsies performed for clinical reasons, functional disturbances are reflected in transcriptome changes representing tissue injury and dedifferentiation but not the inflammatory burden.