Next-generation sequencing (NGS) was recently approved by the United States Food and Drug Administration to detect microsatellite instability (MSI) arising from defective mismatch repair (dMMR) in patients with metastatic colorectal cancer (mCRC) before treatment with immune checkpoint inhibitors (ICI). In this study, we aimed to evaluate and improve the performance of NGS to identify MSI in CRC, especially dMMR mCRC treated with ICI. CRC samples used in this post hoc study were reassessed centrally for MSI and dMMR status using the reference methods of pentaplex polymerase chain reaction and immunohistochemistry. Whole-exome sequencing (WES) was used to evaluate MSISensor, the Food and Drug Administration-approved and NGS-based method for assessment of MSI. This was performed in (1) a prospective, multicenter cohort of 102 patients with mCRC (C1; 25 dMMR/MSI, 24 treated with ICI) from clinical trials NCT02840604 and NCT033501260, (2) an independent retrospective, multicenter cohort of 113 patients (C2; 25 mCRC, 88 non-mCRC, all dMMR/MSI untreated with ICI), and (3) a publicly available series of 118 patients with CRC from The Cancer Genome Atlas (C3; 51 dMMR/MSI). A new NGS-based algorithm, namely MSICare, was developed. Its performance for assessment of MSI was compared with MSISensor in C1, C2, and C3 at the exome level or after downsampling sequencing data to the MSK-IMPACT gene panel. MSICare was validated in an additional retrospective, multicenter cohort (C4) of 152 patients with new CRC (137 dMMR/MSI) enriched in tumors deficient in MSH6 (n= 35) and PMS2 (n= 9) after targeted sequencing of samples with an optimized set of microsatellite markers (MSIDIAG). At the exome level, MSISensor was highly specific but failed to diagnose MSI in 16% of MSI/dMMR mCRC from C1 (4 of 25; sensitivity, 84%; 95% confidence interval [CI], 63.9%-95.5%), 32% of mCRC (8 of 25; sensitivity, 68%; 95% CI, 46.5%-85.1%), and 9.1% of non-mCRC from C2 (8 of 88; sensitivity, 90.9%; 95% CI, 82.9%-96%), and 9.8% of CRC from C3 (5 of 51; sensitivity, 90.2%; 95% CI, 78.6%-96.7%). Misdiagnosis included 4 mCRCs treated with ICI, of which 3 showed an overall response rate without progression at this date. At the exome level, reevaluation of the MSI genomic signal using MSICare detected 100% of cases with true MSI status among C1 and C2. Further validation of MSICare was obtained in CRC tumors from C3, with 96.1% concordance for MSI status. Whereas misdiagnosis with MSISensor even increased when analyzing downsampled WES data from C1 and C2 with microsatellite markers restricted to the MSK-IMPACT gene panel (sensitivity, 72.5%; 95% CI, 64.2%-79.7%), particularly in the MSH6-deficient setting, MSICare sensitivity and specificity remained optimal (100%). Similar results were obtained with MSICare after targeted NGS of tumors from C4 with the optimized microsatellite panel MSIDIAG (sensitivity, 99.3%; 95% CI, 96%-100%; specificity, 100%). In contrast to MSISensor, the new MSICare test we propose performs at least as efficiently as the reference method, MSI polymerase chain reaction, to detect MSI in CRC regardless of the defective MMR protein under both WES and targeted NGS conditions. We suggest MSICare may rapidly become a reference method for NGS-based testing of MSI in CRC, especially in mCRC, where accurate MSI status is required before the prescription of ICI.