The feasibility of using stress-wave technique in the transverse direction for the assessment of early stages of decay was investigated using compression test specimens having different annual ring orientations subjected to decay by Tyromyces palustris for various time intervals. Decay detection, quantitative assessment of decay, and the prediction of residual strength of decayed wood with less than five percent weight loss can be feasible using stress-wave parameters (wave velocity, wave impedance, and stress-wave elasticity) and their percent reduction due to decay, measured by stress-wave technique in the transverse direction. The use of stress-wave technique in the transverse direction for the application of this technique to structural members in service is desirable, when considering the easiness of attachment of accelerometers of stress-wave measuring device on the surface of members and also accurate detection of localized decayed areas. In stress-wave technique in the transverse direction, stress-wave parameters measured were different according to the angles between wave propagation path and annual ring, due to the anisotropy of wood structure. Therefore, it is recommended to use percent reduction in stress-wave parameters instead of stress-wave parameters. This evaluation method using percent reduction in stress-wave parameters is ideal when it is impossible to observe annual ring orientation on the transverse surface of wood.