This study analyses costs and effects of treating acoustic neuroma patients by using microsurgery compared to radiosurgery. Radiosurgery is the stereotactic application of radiotherapy and an innovative medical technology. Cost and effect estimates of conventional treatment were based on a retrospective study in the Netherlands. Similar data for a comparable group of patients in Sweden were collected for radiosurgery, as this treatment option is currently not available in the Netherlands. Fifty-three acoustic neuroma patients who had been operated on the University Hospital Rotterdam between November 1990 and February 1995 were included. This group was compared with 92 acoustic neuroma patients treated with radiosurgery (Gamma Knife. Stockholm, Sweden) in the same period. Data on health care use were collected from patient files. To obtain data on production losses and quality of life, a questionnaire was sent by mail in February 1995. This booklet consisted of the Health and Labour-questionnaire (HLQ), the Short Form-36 (SF36) and the EuroQol. The response rate was 92%. Direct costs for microsurgery amounted to Dfl. 20.072,- and for radiosurgery to Dfl. 14.272,-. Indirect costs were respectively Dfl. 16.400,- and Dfl. 1.020,-. General health rating was better for radiosurgery than for microsurgery. On the whole, differences in clinical outcomes between the two patient groups were small. Assuming a reasonable occupancy rate of the expensive radiosurgery equipment, we demonstrated that for the short term treating patients with acoustic neuroma with an extra-meatal tumour diameter of less than 3 centimeters, radiosurgery is more cost-effective than microsurgery.