Raloxifene treatment has been shown to reduce the risk of vertebral fractures and breast cancer in postmenopausal women. The long-term economic implications of treatment with raloxifene have not yet been investigated. The aim of this study was to assess the cost-effectiveness of treating postmenopausal women in the UK with raloxifene. A previously developed computer simulation model was used to estimate the cost-effectiveness of osteoporotic treatments with extra skeletal benefits. The model was populated with epidemiological data and cost data relevant for a UK female population. Data on the effect of treatment were taken from the Multiple Outcomes of Raloxifene (MORE) study, which recruited women with low bone mineral density or with a prior vertebral fracture. Cost-effectiveness was estimated using Quality Adjusted Life Years (QALYs) and life years gained as primary outcome measures. The cost per QALY gained of treating postmenopausal women without prior vertebral fractures was 18,000 pounds, 23,000 pounds , 18,000 pounds and 21,000 pounds at 50, 60, 70 and 80 years of age. Corresponding estimates for women with prior vertebral fractures were 10,000 pounds, 24,000 pounds, 18,000 pounds and 20,000 pounds. In relation to threshold values that are recommended in the UK, the analysis suggests that raloxifene is cost-effective in the treatment of postmenopausal women at an increased risk of vertebral fractures.