This study aimed to evaluate the outcomes and identify the predictive factors of a bladder-preservation approach incorporating maximal transurethral resection of bladder tumor (TURBT) coupled with either pembrolizumab or chemotherapy for patients diagnosed with muscle-invasive bladder cancer (MIBC) who opted against definitive local therapy. We conducted a retrospective analysis on 53 MIBC (cT2-T3N0M0) patients who initially planned for neoadjuvant pembrolizumab or chemotherapy after maximal TURBT but later declined radical cystectomy and radiotherapy. Post-therapy clinical restaging and conservative bladder-preservation measures were employed. Clinical complete remission was defined as negative findings on cystoscopy with biopsy confirming the absence of malignancy if performed, negative urine cytology, and unremarkable cross-sectional imaging (either CT scan or MRI) following neoadjuvant therapy. Twenty-three patients received pembrolizumab, while thirty received chemotherapy. Our findings revealed that twenty-three (43.4%) patients achieved clinical complete response after neoadjuvant therapy. The complete remission rate was marginally higher in pembrolizumab group in comparison to chemotherapy group (52.1% vs. 36.7%, p = 0.26). After a median follow-up of 37.6 months, patients in the pembrolizumab group demonstrated a longer PFS (median, not reached vs. 20.2 months, p = 0.078) and OS (median, not reached vs. 26.8 months, p = 0.027) relative to those in chemotherapy group. Those achieving clinical complete remission post-neoadjuvant therapy also exhibited prolonged PFS (median, not reached vs. 10.2 months, p < 0.001) and OS (median, not reached vs. 24.4 months, p = 0.004). In the multivariate analysis, clinical complete remission subsequent to neoadjuvant therapy was independently associated with superior PFS and OS. In conclusion, bladder preservation emerges as a viable therapeutic strategy for a carefully selected cohort of MIBC patients without definitive local therapy, especially those achieving clinical complete remission following neoadjuvant treatment. For patients unfit for chemotherapy, pembrolizumab offers a promising alternative treatment option.