Background: Neoadjuvant chemoradiotherapy (nCRT) is widely accepted for the treatment of locally advanced rectal cancer (LARC). Watch & wait (W&W) strategy can improve life quality, but needs strict patient selection. We investigated the ability of circulating tumor DNA (ctDNA) to predict treatment outcome and improve risk stratification. Methods: Between 2015 and 2016, we enrolled LARC (T3/T4 and/or N+) patients planned for nCRT. Plasma samples were collected pretreatment, in the middle of nCRT, post-nCRT, before surgery and one week after surgery. Somatic mutations in individual patient were identified via massively parallel sequencing of 455 genes. Responders (ypTRG 0–1) or non-responders (ypTRG 2–3) were recorded. Chi-square test was used to compared ctDNA levels to clinical, radiological and pathological response. Results: We analysed 440 serial plasma samples from 88 patients. Ten cases were pathological complete response (pCR). CtDNA was detectable in 65.9% (58/88), 14.7% (13/88) and 3.4% (3/88) of pretreatment, post-nCRT and post-surgery samples, with most frequent mutations as TP53, APC, KRAS. The rates of responders and non-responders are 24.1% (14/58) and 75.9% (44/58), but no difference was found in baseline ctDNA. 65.5% (38/58) of the patients’ ctDNA level decreased sharply to zero before the end of nCRT, which was consistent to their radiological and pathological changes. CtDNA was detectable in 60% (6/10) pCR cases, most of their ctDNA vanishing at the middle of nCRT. 29.3% (17/58) of the patients’ ctDNA status changed in irregular patterns. However, 5.2% (3/58) of the patients’ ctDNA status goes up during nCRT, all of the three developed metastatic disease during the follow up period. Increased level of ctDNA post-nCRT indicated high rates of disease progression, which was not appropriate for W&W strategy. Conclusions: The baseline ctDNA were not helpful in distinguishing responders from non-responders. Post-nCRT analysis stratifies patients with LARC into subsets at high or low risk of progression. CtDNA analysis could potentially be used to guide patient selection for W&W strategy or adjuvant chemotherapy.