Identification of pathological events in the renal allograft using protocol biopsies at predetermined time intervals may yield useful information and improve outcomes. We examined the influence of decisions taken on the basis of 1- and 3-month protocol biopsies findings on 1-year renal allograft function in a prospective randomized study. Out of 102 living-donor allograft recipients, 52 were randomized to undergo protocol biopsies and 50 controls had only indicated biopsies. All acute rejection (AR) episodes (clinical and subclinical) were treated. Calcineurin inhibitor (CNI) dose adjustments were made on clinical judgment. Baseline recipient and donor characteristics, immunosuppressive drug usage, HLA matches and 2-h cyclosporine levels were similar in both groups. At 1 and 3 months, protocol biopsies revealed borderline (BL) changes in 11.5% and 14% patients, AR in 17.3% and 12% and chronic allograft nephropathy (CAN) in 3.8% and 10%. The incidence of clinically evident AR episodes was similar in the two groups, but biopsy group had lower serum creatinine at 6 months (p = 0.0003) and 1 year (p < 0.0001). The renal functions were similar in those with normal histology and BL changes. Protocol biopsies are helpful in detecting subclinical histological changes in the graft and improving short-term renal allograft function.