Background: Acute kidney injury (AKI) is a common complication in critically ill patients, associated with high morbidity and mortality. Early diagnosis and prognosis of AKI are crucial for timely intervention and improved outcomes. Serum cystatin-C has emerged as a promising biomarker for AKI. This study aimed to evaluate the diagnostic and prognostic utility of serum cystatin-C levels in critically ill patients with AKI. Methods: A prospective observational study was conducted in the Department of General Medicine at Chirayu Medical College & Hospital, Bhopal from October 2023 to March 2024. Adult patients admitted to the intensive care unit (ICU) were included and categorized into AKI and non-AKI groups based on the Kidney Disease: Improving Global Outcomes (KDIGO) criteria. Serum cystatin-C levels were measured on admission (day 0) and on days 1, 3, and 7. The diagnostic and prognostic performance of serum cystatin-C was evaluated using receiver operating characteristic (ROC) curves and logistic regression analysis. Results: Of the 324 patients included, 226 (69.8%) developed AKI. Serum cystatin-C levels were significantly higher in the AKI group compared to the non-AKI group at all time points (p<0.001). The area under the ROC curve (AUC) for serum cystatin-C in diagnosing AKI was 0.86 (95% CI: 0.82-0.90) on day 0 and 0.92 (95% CI: 0.88-0.95) on day 1. In the AKI group, higher serum cystatin-C levels on admission were associated with increased mortality (OR: 2.45, 95% CI: 1.52-3.96, p<0.001) and reduced renal recovery (OR: 0.58, 95% CI: 0.36-0.92, p=0.02). Conclusions: Serum cystatin-C is a valuable biomarker for early diagnosis and prognosis of AKI in critically ill patients. Higher serum cystatin-C levels are associated with increased mortality and reduced renal recovery in patients with AKI. Incorporating serum cystatin-C into clinical practice may aid in risk stratification and guide management strategies in critically ill patients with AKI.