The objective of this study is to evaluate the cost-effectiveness of letrozole compared with tamoxifen as first-line therapy in post-menopausal women with advanced breast cancer in Japan. A Markov analytical model was developed to estimate life-year (LY) expectancies, using key transition probabilities obtained from the results of a multinational phase III trial, a literature review and a Japanese medical expert panel. Direct medical costs were estimated, from the payer's perspective, using the expected resource utilization provided by the expert panel, the medical fee table and drug tariff under the national health insurance system. The expected overall life-years (LYs) obtained were 3.68 years for letrozole arm and 3.09 years for tamoxifen arm, showing incremental LYs of 0.59 years in patients receiving letrozole. The total expected costs were 3,644,588 yen (33,133 US dollars) for letrozole arm and 3,322,111 yen (30,201 US dollars) for tamoxifen arm, resulting in a mean incremental cost-effectiveness ratio (ICER) of 546,571 yen (4,969 US dollars) per life-year gained, while the 5 th percentile of ICER showed letrozole dominating tamoxifen and the 95th percentile was 2,310,593 yen (21,005 US dollars). The results suggest that letrozole is a clinically beneficial and cost-effective treatment option when compared with tamoxifen in first-line therapy for advanced breast cancer in Japan.