Current prostate biopsy cores have a very low diagnostic yield. These biopsies often fail to diagnose prostate cancer since 90% of cores are histopathologically classified as benign. The concentrations of endogenous fluorophores in prostate tissue vary with disease states. Thus, fluorescence spectroscopy could be utilized to quantify these variations for identification of malignant lesions. We investigated clinical feasibility of a 14 gauge (1.98 mm) optical biopsy needle guided by fluorescence spectroscopy for real-time in vivo prostate cancer diagnosis. Built-in optical sensor has 8×100μm fibers for tissue excitation and a single 200μm fiber to collect spectral data. Custom-made fluorometer has 2 light-emitting diodes at 290 and 340 nm and a spectrometer. User interface for fluorometer operation and data collection was developed using LabView software. Each spectral data acquisition required ~2 seconds. The in vivo biopsies were performed during radical retropubic prostatectomy surgery on the exposed prostate with blood flow to the gland intact. A tissue biopsy core was obtained from each biopsy site after acquisition of spectral data. Above procedure was repeated ex vivo after surgical excision of the prostate. Biopsy cores were histopathologically classified as either benign or malignant and correlated with corresponding spectral data. Partial Least Square analysis was performed to determine diagnostically significant principal components as potential classifiers. A linear support vector machine and leave-one-out cross validation method was employed for tissue classification. Thirteen patients were consented to the study. Histopathological analysis found cancer in 29/208 in vivo and 51/224 ex vivo viable biopsy cores. Study results show 72% sensitivity, 66% specificity, and 93% negative predictive value for in vivo and 75%, 80%, and 93%, respectively, for ex vivo malignant versus benign prostatic tissue classification. Optical biopsy needle has a very high negative predictive value to indicate benign tissue while sufficient sensitivity for targeting areas suspicious for cancer within the prostate gland. Hence, the optical biopsy needle can increase the diagnostic yield of prostate biopsies with consequent improvement in patient care.