Early detection of multidrug-resistant Mycobacterium tuberculosis (MDR-TB) is of primary importance for both patient management and infection control. Optimal methods for identifying drug-resistant Mycobacterium tuberculosis in a timely and affordable way in resource-limited settings are not yet available. This study prospectively evaluated a low-technology but rapid drug susceptibility testing method, the microscopic observation drug susceptibility assay (MODS), in the concurrent detection of M. tuberculosis and its susceptibilities to isoniazid and rifampin (two drugs defining multidrug-resistant M. tuberculosis) directly from sputum specimens. Sputum samples were collected from 262 smear-positive TB patients in Addis Ababa, Ethiopia. To undertake MODS, 100 mul of decontaminated samples was inoculated into a 24-well plate containing 1 ml of 7H9 broth with and without appropriate drugs. The assay uses an inverted-light microscope to detect characteristic mycobacterial growth in liquid culture. Of 262 smear-positive patients, MODS detected 254 (96.9%) and culture in Löwenstein-Jensen medium detected 247 (94.3%) (P = 0.016). For the 247 cultures, the sensitivity, specificity, and accuracy of MODS for detecting MDR-TB were 92.0, 99.5, and 98.8%, respectively, using the method of proportion as a reference (concordance, 98.8%; kappa value, 0.932). Results for MODS were obtained in a median time of 9 days. MODS is an optimal alternative method for identifying MDR-TB in a timely and affordable way in resource-limited settings.