Differentiating etiologies of transplant dysfunction without biopsy and optimizing therapy for acute rejection by predicting steroid resistance will reduce patient morbidity. Granulysin is a cytolytic molecule released by CTL and NK cells and coexpressed with effectors of acute allograft rejection, like perforin and granzymes. Granulysin mRNA and protein expression were studied in peripheral blood lymphocytes (PBL; n = 61 total, n = 10 with intercurrent infections) and biopsy tissue from adult and children renal transplant recipients (n = 97) by competitive quantitative-reverse transcriptase-PCR (QC-RT-PCR) and immunohistochemistry. Differences in cell phenotypes were studied in steroid sensitive and resistant acute rejection biopsies. Granulysin was studied in phytohemagglutinin (PHA) stimulated cell lines (donor PBL and CD45RO(+) T cells) by FACS, Western blotting, and RT-PCR after pretreating with cyclosporine A (CSA), azathioprine, mycophenolic acid, and steroids. Granulysin mRNA was significantly increased in patient PBL and transplant biopsies during acute rejection (p < 0.0001) and infection (p < 0.001). Rejecting biopsies alone (n = 53) had mononuclear cell granulysin staining. Steroid resistant biopsies (n = 25) had denser granulysin staining (>2 cells/high power field) and CD45RO(+) lymphocytes, when compared with steroid sensitive (n = 28) rejecting tissue. Granulysin levels were unchanged after azathioprine and mycophenolic acid treatment, decreased after treating activated PBL with steroids and cyclosporine A (CSA), and paradoxically, increased (p < 0.05) after treating CD45RO(+) CTL with CSA. Elevated PBL granulysin is a peripheral marker for acute rejection and infection and dense granulysin staining a tissue marker for steroid resistance. Memory CTL abound in steroid resistant grafts and may have a markedly different response to CSA immunotherapy, suggesting a possible mechanism for steroid resistance.