Recently, organ preservation with total neoadjuvant therapy resulted in substantial progress in the management of locally advanced rectal cancer (LARC). The PROSPECT trial showed noninferiority of de-escalation of radiotherapy for patients with low-risk LARC who do not need abdominoperineal resection. Although these escalation and de-escalation approaches offer more personalized therapeutic approaches, the current state of care for patients with rectal cancer is far from individualized management. Circulating tumor DNA (ctDNA) is known to be one of the most powerful prognostic factors for early relapse and has been investigated in several interventional clinical trials to offer more precise treatment algorithms. In this review article, we discuss recent updates from studies examining the role of ctDNA for the prediction of treatment response and recurrence for patients with rectal cancer. We also elaborate on the future potential use of ctDNA in treatment escalation and de-escalation approaches for more personalized therapeutic interventions.