Permethrin impregnated bednets are now being widely promoted as an effective means of protecting African children against malaria, but there is little evidence of their cost-effectiveness. The impact on child mortality of introducing permethrin impregnated bednets was evaluated in a rural district of northern Ghana in a controlled trial. The cost-effectiveness of the intervention is reported in this paper. The total cost of the intervention over the 2 years of follow-up was US $148,245. Cost per impregnated bednet per year and per person protected per year was US $2.4 and 1.2, respectively. Approximately 16,800 child years were protected and 74 child deaths averted at an estimated cost of US $8.8 per child year protected and US $2003 per death averted. In this rural community, where life expectancy at the mean age of death of trial children was 57.5 years, the estimated cost per discounted healthy life-year gained was US $73.5. Sensitivity analysis suggested that this cost-effectiveness ratio might be reduced substantially by feasible changes in programme implementation. This study supports the argument that the cost-effectiveness of bednet impregnation is sufficiently attractive to make it part of a package of high priority interventions for children. Issues of how to finance the provision of nets and insecticide, and especially the relative contribution of governments, households and donors, need urgently to be addressed.