Background. Patient and graft survival after liver transplantation are adversely affected by early posttransplant renal dysfunction. Therefore, our immunosuppressive strategies should be as "renal sparing" as possible. This is the largest published series to date using daclizumab induction therapy in a renal-sparing regimen. Methods. This is a retrospective, nonrandomized study comparing 209 adult liver transplants with daclizumab induction to 115 transplants with no induction. Results. Patient and graft survival were similar, despite higher pretransplant acuity of illness and older age in the induction group. Acute rejection within the first 6 months occurred less commonly in the induction group (25.4% vs. 39.1%, P=0.01), despite significantly delayed initiation and lower doses of a calcineurin inhibitor. Mycophenolate mofetil was used more commonly in induction patients, but the efficacy of daclizumab in preventing rejection was independent of this. Patients with a pretransplant creatinine concentration 1.5 mg/dL or less had less rejection if they received induction. Renal function worsened in noninduction patients but showed sustained improvement throughout follow-up in induction patients with a pretransplant creatinine concentration greater than 1.5 mg/dL. Induction therapy provided better rejection prophylaxis among those requiring temporary calcineurin inhibitor cessation because of renal dysfunction. The incidences of histologic hepatitis C recurrence and cytomegalovirus infection were similar in each group. Conclusions. Liver recipients with and without pretransplant renal dysfunction have less acute rejection with daclizumab induction therapy. This is not associated with an increased risk of over-immunosuppresston. Sustained renal improvement in recipients with pretransplant renal dysfunction is possible with daclizumab induction.