Malakoplakia is an uncommon inflammatory condition rarely involving parenchyma of transplanted kidney. We report a 44-year-old female recipient of a cadaveric renal allograft treated with cyclosporin A and prednisone. After transplantation, E. coli and Citrobacter bacteruria occurred and three years later decreased graft function developed. Percutaneous needle biopsy was performed and diagnosis of malakoplakia was established. Histologically, interstitial sheets of plasmocytes and histiocytes with periodic acid-Shiff positive cytoplasm containing Michaelis-Gutmann bodies were present. Ultrastructurally, phagolysosomes containing membrane fragments and various developmental stages of inclusions to fully developed Michaelis-Gutmann bodies were found. The patient was treated with co-piperacillin and subsequently pefloxacin and renal functions improved after six months follow-up. Our case suggests that malakoplakia represents an abnormal defective histiocytic response to the infection in the setting of immunosuppressive therapy.