295 patients of Graves' disease were studied for early development of transient hypothyroidism (TH) and its prognostic value following I131 therapy. 278 patients received I131 < 10 mci (6.4 +/- 1.7 mci) and 17, a dose of > 10 mci (12.6 +/- 2.6). TH was diagnosed on the basis of low T4 regardless of TSH within the first year after I131 therapy followed by normal T4 and TSH. 32 patients developed TH following administration of < 10 mci I131 and it was symptomatic in 10 patients. No instance of TH after high dose of I131 was noted. I131 uptake > 60% at 2 hours before treatment was a risk factor for developing TH (odds ratio 2.6, 95% confidence interval 0.8-9.6). At diagnosis of TH basal TSH was high in 53%, normal in 32%, or low in 15%; Hypothyroidism recognized during the first six months with basal TSH of 50 microU/ml or higher ruled out TH. Development of TH and its hormonal profile did not influence long term thyroid functions. As no prognostic factors predicted TH before I131 therapy or at the time of diagnosis, re-evaluation of thyroid functions later is essential to avoid unnecessary chronic replacement therapy, if hypothyroidism has been diagnosed within a few months of I131 treatment.