Acute rejection in renal transplant recipients is diagnosed by renal biopsy at an advanced disease stage. There is no modality for sequential monitoring of graft status. We studied the role of urine cytology in predicting acute cellular rejection (ACR) and its ability to correctly diagnose ACR and differentiate it from drug toxicity (DT). Urine samples from 203 renal transplant recipients were studied to determine the cellular composition using cytology and immunocytochemistry for HLA-DR, intercellular adhesion molecule (ICAM)-1, and interleukin (IL)-2R. In a 3-month follow-up period, there were 36 episodes of graft dysfunction, of which 28 occurred due to ACR and 8 due to DT. The cytology results showed a significantly increased percentage of lymphocytes and polymorphonuclear cells in samples obtained before and during the clinical manifestations of ACR. A greater level of expression of antigens was observed before and during ACR. The use of IL2-R-, ICAM-1-, and HLA class II-specific monoclonal antibodies gave very high specificity, sensitivity, and positive predictive values in diagnosing rejection through urine cytology, suggesting that routine cytology along with immunocytochemistry of urine sediment has clinical potential for early diagnosis and management of ACR and DT.