Methods A cost-effectiveness analysis was carried out for photodynamic therapy (PDT) performed in early stage lung cancer cases, which by definition have no lymph node metastasis. The alternative treatment method was lobectomy, which conventionally would have been the first choice of treatment. Costs (C) and effectiveness (E) both of the PDT group and operation group were compared. Effectiveness was determined using quality adjusted life years saved (QALYs) which is the 5-year survival rate adjusted in terms of the quality of life of the patient, and the cost-effectiveness rate was obtained based on the costs of treatment methods during the patient's stay in the hospital. Health care costs, including drugs, were calculated according to the 1992 National Health Insurance list in yen. Costs which were non-reimbursable by the public insurance system, such as for special rooms and sun block cream, were also expressed in yen.Results The total cost of the operated group was yen1,793,832 and that for the PDT group was yen1,017,104. The cost-effectiveness rate of the operated group, that is the average cost of treatment per postoperative living month, was yen37,537, while that of the entire PDT group was yen30,003. This indicates that the cost-effectiveness rate for the operated group is apparently 1.3 times higher than that of the PDT group. The monthly cost-effectiveness rate for the PDT group of lesions smaller than 2 cm was yen25,533. Therefore the cost in the operated group is 1.5 times higher.Conclusions This study demonstrated the merits of PDT for early stage lung cancer from the point of view of cost-effectiveness.