Background Peritumoral edema (PE) identified on T2‐weighted breast MRI is a factor for poor prognosis in breast cancer. Purpose To assess the prognostic value of residual PE (rPE) in patients with PE positive breast cancer prior to neoadjuvant chemotherapy (NACT) who subsequently underwent curative surgery. Study Type Retrospective. Population In total, 128 patients with nonmetastatic invasive breast cancer who underwent breast MRI before and after NACT. Field Strength/Sequence Axial precontrast 2D fast spin echo T2W fat‐suppressed sequence. Axial dynamic 3D gradient echo T1W fat‐suppressed sequence. Assessment PE was diagnosed when a signal intensity as high as water was detected surrounding the tumor on a T2‐weighted breast MRI. PE was qualitatively evaluated by three readers with more than 20 years of experience in interpreting breast field imaging findings. Residual cancer burden (RCB) were assessed post‐NACT. Recurrence‐free survival (RFS) and overall survival (OS) were evaluated as the endpoints of this study. Statistical Tests Chi‐square test; Kaplan–Meier method, log‐rank test, and Cox proportional hazard model. A P ‐value <0.05 was considered statistically significant. Results Pre‐PE was observed in 64 out of 128 patients. Of these, rPE was observed in 21. In the log‐rank test, breast cancer with rPE had significantly worse RFS and OS than that without rPE. Cox proportional hazard analysis identified rPE as a significant prognostic factor for recurrence (hazard ratio, 11.6; 95% confidence interval [CI], 3.05–43.8) and death (hazard ratio, 17.8; 95% CI, 3.30–96.3). Breast cancer with rPE had significant worse RFS and OS than that without rPE in RCB class II, and significant worse OS in pathological complete response, class I and class II in the log‐rank test. Data Conclusion rPE on a T2‐weighted breast MRI was a significant factor for breast cancer recurrence and death in patients with pre‐PE‐positive breast cancer treated with NACT. Level of Evidence 3. Technical Efficacy Stage 2.