Some aspects of thyroid nodule evaluation and management remain controversial. Radionuclide scanning provides functional information about nodules and differentiates cold from hot nodules. Although thyroid cancers are cold on scan, most cold nodules are benign. Ultrasonography visualizes the thyroid gland and nodules with remarkable clarity and provides structural information about location, number, size, and consistency of nodules. Widespread application of ultrasonography has resulted in the frequent discovery of incidental (occult) nodules in the general population. The clinical significance of these nodules remains unknown, and their management has created a dilemma for physicians. Current cost-effective evaluation of nodules does not include scanning or ultrasonography as routine frontline tests. In most centers, fine-needle aspiration biopsy has supplanted imaging studies as the routine initial procedure for differentiating benign from malignant nodules. Cytologic diagnosis is reliable and inexpensive, and it results in a better selection of patients for surgery. Limitations include false-negative diagnoses, nondiagnostic results, and indeterminate "suspicious" results. Laboratory test results are usually normal, but determination of serum thyrotropin may identify a hot nodule, and plasma calcitonin may help diagnose medullary thyroid carcinoma. Treatment of thyroid nodules is controversial. In some practices, benign colloid nodules are treated with suppressive doses of levothyroxine. Recent reports cast doubt on the efficacy of this approach, and it is no longer acceptable to select patients for surgical treatment on the basis of suppressive therapy. Furthermore, suppressive levothyroxine therapy may be associated with significant bone and cardiac side effects, especially in elderly patients and postmenopausal women. Our approach is observation for most patients, and we suggest a careful risk-benefit analysis when suppression is considered. Hot (autonomous) nodules can be treated with radioiodine, surgery, or ethanol injection. The use of sensitive thyrotropin assays has revealed that the "euthyroid" hot nodule is often associated with subclinical hyperthyroidism, warranting treatment if risks of osteoporosis are significant. Small (< 1.5 cm) occult nodules can be observed. Larger (> 1.5 cm) nodules can be selectively evaluated by ultrasonographically guided fine-needle aspiration. It is prudent to consider cost of care, risk-benefit analysis, and the low incidence of malignancy in thyroid nodules when diagnostic tests are selected and the treatment plan is outlined.