Background The aim of this study was to assess the rate of permanent diversion in patients undergoing coloanal anastomosis after neoadjuvant therapy for rectal cancer. Methods We performed a retrospective review of patients with rectal cancer who underwent a total mesorectal excision of a tumor within 9 cm of the anal verge. Results There were 201 patients who underwent resection with coloanal anastomosis, with a mean follow-up period of 51 months. The average tumor distance from the anal verge was 7 cm (range, 4–9 cm). Neoadjuvant therapy was administrated in 145 patients, 47 had no radiation, and 9 received radiation postoperatively. Thirty-two patients (16%) had long-term complications including incontinence, fistulas, and strictures. Twenty-five patients (12%) had recurrent disease, 16 of these were local recurrence. The total rate of permanent diversion was 29 (14%). Reasons for diversion included local recurrence in 12 patients (6%), complications in 10 patients (5%), and poor function in 7 patients (3%). Conclusions Poor bowel function, late complications, and local recurrence all contribute to permanent diversion after a coloanal anastomosis. Neoadjuvant therapy in conjunction with a total mesorectal excision and coloanal anastomosis leads to acceptably low permanent diversion rates in the vast majority of patients.