Background Accurate restaging of rectal cancer is crucial in the selection of candidates for local excision after neoadjuvant chemotherapy and radiation therapy (NCRT). The conventional approach of combined T2-weighted imaging and diffusion-weighted imaging (DWI) at MRI has been found to have limitations in restaging. Purpose To determine the diagnostic performance of contrast-enhanced MRI in distinguishing between pathologic stage ypT0-1 and ypT2-4 rectal cancer after NCRT compared with T2-weighted imaging and DWI by using surgical pathologic specimens as the reference standard. Materials and Methods This retrospective study evaluated MRI scans in all consecutive patients with locally advanced rectal cancer who underwent total mesorectal excision after NCRT in Peking University Cancer Hospital (Beijing, China) from January 2014 to October 2018. All MRI features obtained before and after NCRT were evaluated by two experienced radiologists, independently and blinded to personal, clinical, and histopathologic information. The post-NCRT yT stage was assigned based on high value ( = 1000 sec/mm) DWI with T2-weighted imaging (protocol 1) in the first round and on contrast-enhanced MRI scans (protocol 2) in a second round. The diagnostic accuracies for the differentiation of pathologic stage ypT0-1 from ypT2-4 tumors with the two protocols were compared. Multivariable regression analysis was used to explore the independent predictors of pathologic stage ypT0-1 tumors. Results A total of 328 patients (mean age, 57 years ± 10 [SD]; 227 men; 69%) were enrolled. The area under the receiver operating characteristic curve of the contrast-enhanced MRI protocol in predicting pathologic stage ypT0-1 tumors was 0.81 (95% CI: 0.77, 0.85), which was better than that of the T2-weighted DWI protocol (0.66; 95% CI: 0.60, 0.71; < .001). Multivariable logistic regression analysis showed that yT stage after NCRT on contrast-enhanced MRI scans was the only independent predictor of pathologic stage ypT0-1 tumors ( < .001). Conclusion Contrast-enhanced MRI provides accurate differentiation of ypT0-1 from ypT2-4 tumors after neoadjuvant chemotherapy and radiation therapy. © RSNA, 2022 See also the editorial by Zins and Santiago in this issue.