Local recurrence after resection for rectal cancer remains common despite growing acceptance that inadequate local excision may be implicated. In a prospective study of 190 patients with rectal cancer, we examined the circumferential margin of excision of resected specimens for tumour presence, to examine its frequency and its relation to subsequent local recurrence. Tumour involvement of the circumferential margin was seen in 25% (35/141) of specimens for which the surgeon thought the resection was potentially curative, and in 36% (69/190) of all cases. After a median 5 years' follow-up (range 3.0-7.7 years), the frequency of local recurrence after potentially curative resection was 25% (95% CI 18-33%). The frequency of local recurrence was significantly higher for patients who had had tumour involvement of the circumferential margin than for those without such involvement (78 [95% CI 62-94] vs 10 [4-16]%). By Cox's regression analysis tumour involvement of the circumferential margin independently influenced both local recurrence (hazard ratio = 12.2 [4.4-34.6]) and survival (3.2 [1.6-6.53]). These results show the importance of wide local excision during resection for rectal cancer, and the need for routine assessment of the circumferential margin to assess prognosis.