Newer antibiotics have higher acquisition costs than the first-line antibiotics but may offer superior outcomes, including enhanced eradication of resistant organisms, safety, and compliance in the treatment of acute otitis media. A rational choice among differing therapies should systematically address all these factors. We conducted a cost-utility analysis to compare the commonly used second-line antibiotics--cefaclor (CEF), amoxicillin-clavulanate (AMX-CLA), and erythromycin-sulfisoxazole (ERY-SULF). A meta-analysis of comparative clinical trials was performed to derive point estimates with a 95% confidence interval for rates of success and adverse events. Costs for drugs, laboratory tests, and physician visits were obtained from the government formulary and fee schedules. The cost for management of adverse events was estimated from the findings of a survey of pediatricians. Utilities (preferences or ratings of health states) were derived from responses of physicians to a standardized scenario of acute otitis media with combinations of adverse events. These utilities were used to obtain quality-adjusted life-day (QALD) scores over a 30-day horizon as a measure of effectiveness. Overall cost and QALD were calculated using decision analytic modeling. CEF performed significantly better than the two other drug treatments with the lowest expected cost ($108.00) and highest outcome (28.15 QALD); AMX-CLA was second in cost and third in outcome ($119.00, 27.98 QALD); and ERY-SULF was third in cost and second in outcome ($120.00, 28.03 QALD). These rankings were robust to variations in event rates over the 95% confidence interval. In this analysis, CEF was the most cost-effective antibiotic strategy for second-line therapy when differential success rates, adverse-event profiles, and impact on quality-of-life were considered.