Purpose The presence of tumor-infiltrating lymphocytes (TILs) in tumors is superior to conventional pathologic staging in predicting patient outcome. However, their presence does not define TIL functionality. Here we developed an assay that tests TIL cytotoxicity in patients with locally advanced rectal cancer before definitive treatment, identifying those who will obtain a pathologic complete response (pCR). We also used the assay to demonstrate the rescue of TIL function after checkpoint inhibition blockade (CIB). Patients and Methods Thirty-four consecutive patients were identified initially, with successful completion of the assay before surgery in those 17 patients who underwent full treatment. An in vitro cytotoxic assay of rectal cancer tumoroids cocultured with patient-matched TILs was established and validated. Newly diagnosed patients were recruited with pretreatment biopsy specimens processed within 1 month. Evaluation of TIL-mediated tumoroid lysis was performed by measuring the mean fluorescence intensity of cell death marker, propidium iodide. CIB (anti–programmed cell death protein 1 [anti–PD-1] antibody) response was also assessed in a subset of patient specimens. Results Six of the 17 patients achieved an objective pCR on final evaluation of the resected specimen after neoadjuvant chemoradiotherapy. Cytotoxic killing identified the pCR group with a higher mean fluorescence intensity (27,982 [95% CI, 25,340 to 30,625]) compared with the non-pCR cohort (12,428 [95% CI, 9,434 to 15,423]; p < .001). Assessment of the effectiveness of CIB revealed partial restoration of cytotoxicity in TILs with increased PD-1 expression with anti–PD-1 antibody exposure. Conclusion Evaluating TIL function can be undertaken within weeks of the diagnostic biopsy, affording the potential to alter patient management decisions and refine selection for a watch-and-wait protocol. This cytotoxic assay also has the potential to serve as a platform to assist in the additional development of CIB.