This randomized controlled trial investigated the effectiveness and cost-effectiveness of dry-needling and exercise compared with sham dry-needling and exercise for chronic whiplash-associated disorders (WAD). The setting was a single university centre and 4 physiotherapy practices in Queensland, Australia. Eighty patients with chronic WAD (>3 months) were enrolled between June 2009 and August 2012 with 1-year follow-up completed in August 2013. The interventions were 6 weeks of dry-needling to posterior neck muscles (n = 40) and exercise or sham dry-needling and exercise (n = 40). The primary outcomes of the Neck Disability Index (NDI) and self-rated recovery were measured at baseline, 6 and 12 weeks, 6 and 12 months by a blinded assessor. Analysis was intention to treat. An economic evaluation was planned but missing data deemed further analysis unwarranted. Seventy-nine patients (99%) were followed up at 6 weeks, 78 (98%) at 12 weeks, 74 (93%) at 6 months, and 73 (91%) at 12 months. The dry-needling and exercise intervention was more effective than sham dry-needling and exercise in reducing disability at 6 and 12 months but not at 6 and 12 weeks. The treatment effects were small and not clinically worthwhile. At 6 weeks, the treatment effect on the 0-100 NDI was -0.3 (95% confidence interval -5.4 to 4.7), 12 weeks -0.3 (-5.2 to 4.9), 6 months -4.4 (-9.6 to -0.74), and 12 months -3.8 (-9.1 to -0.5). There was no effect for self-rated recovery. In patients with chronic WAD, dry-needling and exercise has no clinically worthwhile effects over sham dry-needling and exercise.