Abstract Background: Tumor budding (TB), a single or cluster of up to 4 cells at the tumor-invasive front, is a well-established prognostic marker and an independent predictor of metastasis in colorectal cancer (CRC). Despite that, the underlying molecular mechanism that drives this phenotype and its relationship with the tumor microenvironment (TME) remains unclear. Methods: The relationship between TME and TB was investigated using multiplex immunofluorescence (mIF) in tissue microarrays (TMAs) of the tumor core and full sections. GeoMxTM digital spatial profiling (DSP) was employed to identify the mechanism underlying TB and its surrounding TME, using the GeoMx Immune-oncology pathway panel in full CRC sections. Results: In the current study, TB was independently associated with decreased cancer-specific survival (OR 1.856, 95% CI 1.360-2.533, P<0.001) in a cohort of 650 CRC patients. Additionally, TB was significantly associated with the Glasgow microenvironment score (GMS) (P=0.017). mIF performed in TMAs of the tumor core (n=650) showed that high CD3+ (OR0.374, 95% CI0.263-0.533, P<0.001) associated with good prognosis, whereas high CD68+ (OR2.902, 95% CI1.728-4.873, P<0.001) associated with poor prognosis. In addition, eighteen full sections were stained with an immune-related multiplex panel. Interestingly, in the invasive area, CD3+CD8+ was less frequent, while CD3+FOXP3+ was significantly higher compared to the stromal area in a patient with high TB (P=0.06, P<0.01, respectively). Moreover, though no significant difference was found, tumors with high buds showed an increase in neutrophil marker (CD66b) compared to low buds. No association is also found with a myeloid marker (CD68, CD163). The proliferation index of the tumor in the invasive area showed that the tumor with low buds is likely to be more proliferative. Besides, we found that a small subpopulation of budding is KI67+, suggesting the heterogeneity among TB. Furthermore, the mechanism underlying TB was observed using GeoMxTM. Twelve cases, selected from mIF stained, with low (n=6) or high buds (n=6) were utilized, and 96 areas of interest (AOI) were identified from the tumor core, invasive front, and stroma. The results showed the differential expression of genes between the tumor core and the invasive front in patients with high TB. A significant decrease in immune-related genes (e.g., CD3, NKG7, IL6, CXCR6, CD47, IFNAR1 and VSIR) compared to the stromal area at the invasive front was also observed (P<0.001). Conclusion: TB is associated with poor prognosis and showed a distinct gene expression characteristic compared to the tumor mass. It may also affect the inflammatory response at the invasive tumor. The underlying mechanism of TB and its relationship with TME warrants future studies to confirm this finding. Citation Format: Phimmada Hatthakarnkul, Holly Leslie, Hester Van Wyk, Leah Officer-Jones, Silvia Cusumano, Aula Ammar, Kathryn A.F. Pennel, Jean A. Quinn, Jennifer Hay, James Park, Noori Maka, John Le Quesne, Chanitra Thuwajit, Nigel Jamieson, Joanne Edwards. Understanding the molecular mechanism of tumor budding and its relationship with tumor microenvironment in colorectal cancer. [abstract]. In: Proceedings of the American Association for Cancer Research Annual Meeting 2023; Part 1 (Regular and Invited Abstracts); 2023 Apr 14-19; Orlando, FL. Philadelphia (PA): AACR; Cancer Res 2023;83(7_Suppl):Abstract nr 5558.