To assess the accuracy of preoperative staging of rectal cancer with magnetic resonance imaging to predict surgical circumferential resection margins. Prospective observational study of rectal cancers treated by colorectal multidisciplinary teams between January 2002 and October 2003. 11 colorectal units in four European countries. 408 consecutive patients presenting with all stages of rectal cancer and undergoing magnetic resonance imaging before total mesorectal excision surgery and histopathological assessment of the surgical specimen. Accuracy of magnetic resonance imaging in predicting a curative resection based on the histological yardstick of presence or absence of tumour at the margins of the specimen. 354 of the 408 patients had a clear circumferential resection margin (87%, 95% confidence interval 83% to 90%). Specificity for prediction of a clear margin by magnetic resonance imaging was 92% (327/354, 90% to 95%). High resolution scans were technically satisfactory in 93% (379/408). Surgical specimens were histopathologically graded as complete or moderate in 80% (328/408), and the median lymph node harvest was 12 (range 0-49). Magnetic resonance imaging predicted clear margins in 349 patients. At surgery 327 had clear margins (94%, 91% to 96%). High resolution magnetic resonance imaging accurately predicts whether the surgical resection margins will be clear or affected by tumour. This technique can be reproduced accurately in multiple centres to predict curative resection and warns the multidisciplinary team of potential failure of surgery, thus enabling selection of patients for preoperative treatment.