Currently, microsurgical resection of acoustic neuromas by an experienced, multidisciplinary team is thought to be the treatment of choice. During the past 20 years stereotactic radiosurgery has been used as an alternative to surgical removal. To compare the results of both microsurgery and stereotactic radiosurgery, we conducted a study of 87 patients with unilateral, previously unoperated acoustic neuromas with an average diameter less than 3 cm treated by the neurosurgical service during 1990 and 1991. Preoperative patient characteristics and average tumor size were similar between the treatment groups. State of the art microsurgical or radiosurgical techniques were used by experienced surgeons in both treatment groups. The treatment groups were compared based on cranial nerve preservation, tumor control, postoperative complications, patient symptomatology, length of hospital stay, total management charges, effect on employment status, and overall patient satisfaction. Stereotactic radiosurgery was more effective in preserving normal postoperative facial function (P < 0.05), and hearing preservation (P < 0.03) with less treatment associated morbidity (P < 0.01). Effect on preoperative symptoms were similar between the treatment groups. Postoperative functional outcomes and patients' satisfaction of their tumor management were greater after stereotactic radiosurgery when compared to the microsurgical group, although they did not reach statistical significance (P = 0.07 and P = 0.10, respectively). Patients returned to independent functioning sooner after stereotactic radiosurgery (P < 0.001). Hospital length of stay and total management charges were less in the radiosurgical group (P < 0.001). When compared to microsurgical removal, stereotactic radiosurgery proved to be an effective and less costly management strategy of unilateral acoustic neuromas less than 3 cm in diameter. For many acoustic neuroma patients, stereotactic radiosurgery should be offered as an alternative management strategy.