Background There is no written consensus as to when and in what conditions simple nephrectomy should be performed for hypo-functioning obstructed kidneys. We aimed to assess renal function and the requirement of nephrectomy in patients that underwent percutaneous nephrostomy (PCN) despite being indicated for nephrectomy due to a split renal function of less than 10% caused by ureteral obstruction. Methods This prospective study includes 18 patients with unilateral upper urinary tract obstruction and renal parenchymal loss on Technetium-99 m dimercaptosuccinic acid (DMSA) scintigraphy. Each patient underwent DMSA scan (DMSA-1) prior to PCN. After a 2-week follow-up period, a second DMSA scan was performed to assess renal function of each kidney (DMSA-2). Nephrectomy was performed in the kidneys functioning below 10% of their capacity, whereas kidneys functioning above 10% of their capacity were treated as appropriate to their etiologies. Renal functions and DMSA results were compared before and after nephrostomy with Paired-samples t-test and one-way ANOVA. Results Following nephrostomy, 8 (44.4%) patients had a kidney functioning above 10% of its capacity on DMSA scan and received etiology-based treatment. Glomerular filtration rates of these patients also improved significantly. A total of 9 patients who did not improve renal functions underwent nephrectomy. Conclusion The results indicated that in obstructed kidneys functioning below 10% of their capacity, renal function can be recovered by using a diversion technique (such as PCN) that could alleviate the pressure within the renal pelvis and kidney parenchyma, instead of directly performing simple nephrectomy.