The cost-effectiveness of chemotherapy for pulmonary sputum smear-positive tuberculosis was examined in the national tuberculosis control programmes of Malawi, Mozambique and Tanzania. In these three programmes, routine cure rates have exceeded 80 per cent. Average, average incremental and marginal unit costs for standard, short-course and retreatment regimens with and without hospitalization have been measured. The average incremental cost per year of life saved through chemotherapy ranged from US $0.90-3.10. In all conditions, short-course chemotherapy is preferable to standard 12-month chemotherapy. When hospitalization during the intensive phase of chemotherapy increases the cure rate by 10-15 percentage points, it can be relatively cost-effective. Analysing the cost-effectiveness of short-course and standard chemotherapy, where the depth of the margin of benefit is different, illustrates some of the dangers of simplistic use of cost-effectiveness ratios.