The cost effectiveness of ligament reconstruction for acute anterior cruciate ligament tears in young adults was compared with the cost effectiveness of nonoperative management. A decision tree was constructed to predict the expected functional outcomes for operative and nonoperative treatment. Outcome probabilities were derived from the surgical and natural history literature. Cost data were based on averaged figures from the senior author's institution. Utility values were determined from a questionnaire administered to 285 local university students. Cost effectiveness was calculated in terms of dollars spent per additional quality adjusted life year provided by the surgical reconstruction for the initial 7 years after an injury. The operative strategy provided 5.10 quality adjusted life years versus 3.49 years for nonoperative treatment, yielding a marginal effectiveness of 1.61 quality adjusted life years. The estimated total costs of the operative and nonoperative strategies were $11,768 and $2333, respectively, for a marginal cost of $9435. The resulting marginal cost effectiveness ratio was $5857 per quality adjusted life year. These data suggest that, when based on functional outcomes, anterior cruciate ligament reconstruction is a cost effective method of treatment for acute tears in young adults. The cost effectiveness ratio predicted compares favorably with those of other health care interventions that aim to improve quality of life.