Introduction: Breast cancer is the most common malignancy detected in the female population in Kerala, India. Seroma formation after Modified Radical Mastectomy (MRM) may lead to a delay in recovery, a prolongation of hospital stay, and can also affect treatment by delaying adjuvant therapy and increasing the risk of infection. Topical Tranexamic Acid (TXA) reduces bleeding, wound drainage duration and seroma formation. Aim: To find the effect of topical application of TXA on wound drainage and seroma formation after MRM. Materials and Methods: The present prospective observational study was conducted in the Department of General Surgery, Government Medical College, Kottayam, Kerala, India, from February 2022 to January 2023. A total of 150 patients who underwent MRM were randomly selected to receive either TXA or a placebo before wound closure. Two groups were formed: Group-1 (interventional group) received 20 mL of diluted TXA (25 mg/mL), while Group-2 (placebo group) received normal saline. Each group consisted of 75 female patients. They were compared based on drain amount, number of days the drain was in place and seroma formation. Categorical parameters like the number of days the drain was kept, cumulative drain amount, and seroma occurrence were expressed as percentages. Statistical analysis was done with Chi-square test with a p-value <0.05. Results: The median age of the patients was 50-60 years. On postoperative day 1, the drain amount in Group-1 was 37.3%, while in Group-2, it was 54.7%, with 1.3% of patients in Group-1 and 6.7% in Group-2 having more than 300 mL drained (p-value=0.001). By postoperative day 7, 21.3% of patients in Group-1 had drained less than 50 mL, compared to only 4% in Group-2 (p-value=0.02). The majority of patients in Group-1 had their drains removed in 5-10 days (97.3%), whereas in Group-2, drains were removed in 11-14 days (56%). Seroma formation occurred in 8% of patients in Group-1 and 5.3% in Group-2 (p-value=0.512). Conclusion: All patients tolerated TXA without any side effects and it effective in lowering the volume and duration of wound drainage following MRM.