Urinary liver-type fatty acid-binding protein (uL-FABP) is a biomarker of kidney hypoxia and ischemia, and thus offers a novel approach to identify early kidney insults associated with increased risk of graft failure in outpatient kidney transplant recipients (KTR). We investigated whether uL-FABP is associated with graft failure and whether it improves risk prediction. We studied a cohort of 638 outpatient KTR with a functional graft ≥1-year. During a median follow-up of 5.3 years, 80 KTR developed graft failure. uL-FABP (median 2.11, interquartile range 0.93–7.37 µg/24"/>h) was prospectively associated with the risk of graft failure (hazard ratio 1.75; 95% confidence interval 1.27–2.41 per 1-SD increment; P =.001), independent of potential confounders including estimated glomerular filtration rate and proteinuria. uL-FABP showed excellent discrimination ability for graft failure (c-statistic of 0.83) and its addition to a prediction model composed by established clinical predictors of graft failure significantly improved the c-statistic to 0.89 (P for F-test <.001). These results were robust to several sensitivity analyses. Further validation studies are warranted to evaluate the potential use of a risk-prediction model including uL-FABP to improve identification of outpatient KTR at high risk of graft failure in clinical care.