A 
system and method for aligning a patient's leg, for establishing the ultimate alignment of the leg prior to making a horizontal femoral 
cut or a horizontal tibial 
cut, for preparing the 
distal femur for receiving a femoral 
implant, and for making the horizontal, femoral and tibial cuts. The 
system and method incorporate a spacer, a 
cutting guide, and a template. The spacer is insertable between a 
distal femur and a 
proximal tibia to rotate the 
tibia with respect to the 
femur into the desired alignment. The 
cutting guide is engageable with the spacer, and can be fixed to the 
proximal tibia and the 
distal femur. The 
cutting guide has openings sized and shaped to guide a 
surgical saw to make the horizontal femoral 
cut and the horizontal tibial cut. The template is shaped to closely conform with the distal 
femur to allow the leg to be extended and to allow the procedure to be performed without dislocating a patella. Through one method of the present invention, the practitioner can select the desired ultimate alignment of the leg prior to making the horizontal, tibial and femoral cuts. As a result, when a replacement knee is implanted, the leg will be in the desired alignment.