BACKGROUND Chronic renal allograft failure remains a major challenge to overcome. Factors such as donor quality, delayed graft function (DGF), acute rejection, and immunosuppression are known to affect long-term outcome, but their relationship to histological damage to graft outcome is unclear. METHODS Protocol kidney biopsies (n=112) obtained at 3 months after transplantation yielded 102 with adequate tissue. Histology was scored by the Banff schema, and compared with implantation biopsies (n=91), repeat 12-month histology (n=39), decline in serum creatinine and serial isotopic glomerular filtration rate, onset of chronic allograft nephropathy (CAN), and actuarial graft survival censored for death with a functioning graft. RESULTS At a median follow-up of 9.3 years, 20 patients had graft failure and 26 died with a functioning graft. Banff chronic nephropathy was present in 24% of 3-month biopsies, and was predicted by microvascular disease in the donor, cold ischemia, DGF, and acute vascular rejection (P<0.001). Acute glomerulitis at 3 months correlated with segmental glomerulosclerosis at 12 months, subsequent recurrent glomerulonephritis, and graft failure (P<0.01). Subclinical rejection at 3 months occurred in 29% of biopsies, correlated with prior acute rejection and HLA mismatch, and led to chronic histological damage by 12 months (r=0.25-0.67, P<0.05-0.001). Subclinical rejection, arteriolar hyalinosis, and tubulitis present at 3 months had resolved by 12 months. The 10-year survival rates for Banff chronic nephropathy were 90.4% for grade 0, 81.0% grade 1, and 57.9% for grades 2 or greater (P<0.01). Early tubulointerstitial damage at 3 months profoundly influenced graft survival beyond 10 years. CAN was predicted by kidney ischemia, 3-month chronic intimal vascular thickening, tubular injury, proteinuria, and late rejection. Chronic fibrointimal thickening of the small arteries and chronic interstitial fibrosis at 3 months independently predicted graft loss and decline in renal function (P<0.05-0.001). CONCLUSIONS Early transplant damage occurs in the tubulointerstitial compartment from preexisting donor kidney injury and discrete events such as vascular rejection and DGF. Subsequent chronic damage and graft failure reflect accumulated previous injury and chronic interstitial fibrosis, vascular impairment, subclinical rejection, and injury from late rejection. CAN may be conceptualized as the sequelae of incremental and cumulative damage to the transplanted kidney. The duration of graft survival is dependent and predicted by the quality of the transplanted donor kidney combined with the intensity, frequency, and irreversibility of these damaging insults.