Noninvasive, cost-effective biomarkers that allow accurate monitoring of graft function are needed in kidney transplantation. Since microRNAs (miRNAs) have emerged as promising disease biomarkers, we sought to establish an miRNA signature in urinary cell pellets comparing kidney transplant patients diagnosed with chronic allograft dysfunction (CAD) with interstitial fibrosis and tubular atrophy and those recipients with normal graft function. Overall, we evaluated 191 samples from 125 deceased donor primary kidney transplant recipients in the discovery, initial validation, and the longitudinal validation studies for noninvasive monitoring of graft function. Of 1733 mature miRNAs studied using microarrays, 22 were found to be differentially expressed between groups. Ontology and pathway analyses showed inflammation as the principal biological function associated with these miRNAs. Twelve selected miRNAs were longitudinally evaluated in urine samples of an independent set of 66 patients, at two time points after kidney transplant. A subset of these miRNAs was found to be differentially expressed between groups early after kidney transplant before histological allograft injury was evident. Thus, a panel of urine miRNAs was identified as potential biomarkers for monitoring graft function and anticipating progression to CAD in kidney transplant patients.