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Immune checkpoint inhibitors (ICIs) have fundamentally transformed the treatment landscape for localized colorectal cancer (CRC), particularly for the mismatch repair-deficient (dMMR) or microsatellite instability-high (MSI-H) subgroups. This review evaluates the current clinical evidence and evolving paradigms of immunotherapy in early-stage CRC. In localized MSI-H colon and rectal cancers, neoadjuvant immunotherapy has demonstrated unprecedented efficacy, yielding near-universal major pathologic responses and high rates of pathologic complete responses. For MSI-H rectal cancer, these deep and sustained clinical complete responses have established nonoperative management as a viable, organ-preserving standard of care for highly selected patients undergoing rigorous multidisciplinary surveillance. Despite these rapid advancements, critical questions remain regarding optimal regimen selection, treatment duration, and the integration of circulating tumor DNA (ctDNA) for molecular residual disease monitoring. Although ctDNA is a promising dynamic biomarker, it currently cannot replace definitive pathologic assessment outside of clinical trials. Furthermore, extending the benefits of immunotherapy to the majority of patients with microsatellite-stable (MSS) CRC represents a significant unmet clinical need. Current evidence for ICIs in localized MSS disease remains limited, although investigational combination strategies incorporating radiation, chemotherapy, and novel immune modulators are yielding hypothesis-generating signals. Future progress hinges on precision de-escalation protocols and biomarker-driven, response-adapted trial designs to validate surrogate end points and optimize patient outcomes across all localized CRC subtypes.