Macroscopic and microscopic pathology review was used to assess the degree of tumor reduction after preoperative chemotherapy in 90 patients with inflammatory and locally advanced breast cancer. Fifteen (17%) patients had no evident residual macroscopic tumor on gross pathological examination, and 6 of these 15 had no residual tumor on microscopic review either. There was no significant difference in disease-free and overall survival between the six patients with no microscopic disease and the nine patients with only microscopic residual disease but no residual macroscopic tumor. These 15 patients with major reduction after induction chemotherapy had a longer disease-free survival (DFS) (median not reached at 5 yr) than the other 75 patients with lesser degrees of tumor reduction (DFS = 22 mo; P less than 0.01). Clinical evaluation of response to chemotherapy was a less accurate predictor of outcome than was the pathological assessment of response. Complete clinical responders had a 4-yr DFS of 55%, whereas patients with non macroscopic residual tumor following preoperative chemotherapy, less than one-half of whom had been judged to be a complete clinical responder, had a median DFS of greater than 60 mo and a 4-yr DFS of 75%. Patients whose mastectomy specimen had no macroscopic residual disease had a 93% 5-yr survival compared to patients with a less marked response to therapy who had a 5-yr survival of 30% (P less than 0.01). No pretreatment patient or tumor-related variables correlated with the degree of tumor reduction following preoperative therapy. Achievement of a mastectomy specimen free of residual macroscopic tumor after preoperative chemotherapy is an excellent prognostic factor for a prolonged DFS and survival. This information should be considered in the selection of postoperative systemic therapy.