This study aimed to assess the progression-free and overall survival of patients with residual microscopic disease following neoadjuvant chemoradiotherapy and rectal resection for locally advanced rectal cancer. Two-hundred and thirty-four consecutive rectal cancer patients who had neoadjuvant chemoradiotherapy followed by radical resection (from May 2000 to April 2012) were divided according to pathological tumour response: residual microscopic disease (MIC), complete response (pCR) and partial/no response (non-CR). Data on the neoadjuvant regime, treatment-to-surgery interval, final pathology, type of operation, operative time, postoperative complications, length of hospital stay, disease recurrence and mortality were compared between the groups. There were 13 (5.5%) MIC patients, 48 (20.5%) with pCR and 173 (73.9%) with non-CR group. The groups were demographically comparable. MIC patients had more retrieved lymph nodes compared with the non-CR and pCR patients (median 13 compared with 8 and 10, respectively, P=0.0086). The 5-year overall survival rates were 93.4% for the pCR and MIC patients vs 82.1% for the non-CR patients (P=0.0324). The 5-year progression-free survival was 85.2% for the pCR and MIC patients vs 73.8% for the non-CR patients (P=0.086). We have identified and assessed a new pathological subgroup of rectal cancer patients who had residual microscopic disease after neoadjuvant therapy. The survival analysis aligned them closely with pCR patients.