Results from the completed treatment analysis of the ATAC (Arimidex, Tamoxifen alone or in combination) trial indicated that anastrozole was significantly superior to tamoxifen in terms of efficacy and safety in the adjuvant treatment of postmenopausal women with hormone receptor-positive (HR+) early breast cancer. On the basis of these results, this study estimated the cost-effectiveness of anastrozole vs tamoxifen, from the perspective of the UK National Health Service (NHS). A Markov model was developed using the 5-year completed treatment analysis from the ATAC trial (ISRCTN18233230), as well as data obtained from published literature and expert opinion. Resource utilisation data and associated costs (2003-4 UK pound) were compiled from standard sources and expert opinion. Utility scores for a number of health states were obtained from a cross-sectional study of 26 representative patients using the standard gamble technique. The utility scores were then inserted into the model to obtain cost per quality adjusted life-year (QALY) gained. Costs and benefits were discounted at recommended annual rates of the UK Treasury (3.5%). Modelled for 25 years, anastrozole, relative to generic tamoxifen, was estimated to result in 0.244 QALYs gained per patient at an additional cost of pound4315 per patient). The estimated incremental cost-effectiveness of anastrozole compared with tamoxifen was pound17 656 per QALY gained. There was a greater than 90% probability that the cost-effectiveness of anastrozole was below pound30 000 per QALY gained and of the order of 65% that it was below pound20 000 per QALY gained. The results were robust to all parameters tested in sensitivity analysis. Compared with commonly accepted thresholds, anastrozole is a cost-effective alternative to generic tamoxifen in adjuvant treatment of postmenopausal women with HR+ early breast cancer from the UK NHS perspective.