Dronedarone is an anti-arrhythmic drug (AAD) originally approved for the treatment of atrial arrhythmias. The effectiveness and side effects of dronedarone have not been adequately compared to other commonly used AADs using observational data. We compared rates of recurrent atrial arrhythmias, incidence of side effects, and discontinuation rates of dronedarone to another class III AAD, dofetilide. We included patients from a single academic medical center between 2003 and 2010. Chart review was utilized to collect historical data of baseline clinical characteristics, side effects, arrhythmia recurrence, and drug discontinuation. Propensity score matching was used to balance baseline covariates. Cox-proportional hazard models were used to compare rates of recurrence between dronedarone and dofetilide. Patients were excluded if they failed to acutely achieve sinus rhythm, developed side effects leading to immediate discontinuation, or did not have sufficient follow-up. The final analysis included 127 dofetilide patients and 57 dronedarone patients. Fifty-nine patients (46.5%) experienced recurrence in the dofetilide group within the first year of treatment compared to 42 dronedarone patients (71.2%) (p < 0.01). The adjusted hazard rate of recurrence was 2.42 times greater for dronedarone compared to dofetilide (95% CI: 1.44, 4.07; p-value < 0.01). Side effects leading to drug discontinuation, including significant QT prolongation, developed more frequently with dofetilide (24.1% vs. 9.9%; p < 0.01). Dronedarone is less effective than dofetilide in arrhythmia suppression. Our findings suggest dofetilide is associated with more serious side effects and a higher rate of discontinuation.