This trial will enroll patients with locally advanced rectal cancer (resectable and non-resectable).The phase Ib dose escalation portion of trial is designed to determine the maximum tolerated dose (MTD) of CRLX101 when combined with standard neoadjuvant therapies capecitabine (Cape) and radiation therapy (XRT). CRLX101 is a nanopharmaceutical (NP) formulation of camptothecin. These results will determine the recommended phase II dose (RP2D) for CRLX101 in this setting. The phase II portion of the trial is designed to evaluate the efficacy and safety of CRLX101 at the RP2D, when combined with capecitabine and radiation therapy prior to surgery.