Background: Budding is a complementary prognostic factor for colorectal cancer. In this study, we aimed to clarify the role of tumor budding in rectal cancer patients after preoperative chemoradiotherapy. Methods: A total of 124 patients with rectal cancer treated with neoadjuvant chemoradiotherapy and consecutive surgery were included. Surgical specimens were evaluated for budding and routine clinicopathological features. Budding was evaluated on hematoxylin and eosin (H&E)-stained slides and by cytokeratin immunohistochemical (IHC) staining. Results: A budding rate of 36.9% (n = 38) by H&E and 55.6% (n = 55) by IHC was observed. Budding was significantly associated with a high ypT and ypN status, poor differentiation, and low degrees of tumor regression. Moreover, budding was strongly predictive of a worse patient outcome, as measured by tumor recurrence or death. In multivariate analyses, budding remained the only significant parameter for overall survival and was even superior to the ypT and ypN status (budding in H&E: hazard ratio (HR) 2.72, 95% confidence interval (95% CI) 1.15-6.44, p = 0.023; budding in IHC: HR 5.19, 95% CI 1.62-16.61, p = 0.006). Conclusion: Budding is a strong prognostic predictor of survival in rectal cancer patients after neoadjuvant therapy. A standardized evaluation of tumor budding after neoadjuvant therapy may thus aid in risk stratification and guide the clinical management of patients with rectal cancer. Immunostaining can help to enhance the diagnostic accuracy and prognostic significance.