The purpose of this study was to determine the impact of ultrasound-guided fine-needle aspiration biopsy (USFNA) in the cytological diagnosis of nodular thyroid disease. It remains unclear exactly what role USFNA should play in the cytological diagnosis of nodular thyroid disease. All patients who underwent fine-needle aspiration (FNA) for nodular thyroid disease at Stanford University Medical Center from 1991 to 1996 were included in the study. Histopathologic diagnoses were compared to cytological diagnoses for those patients who underwent surgery. FNA was performed on a total of 497 thyroid nodules. Palpation-guided FNA (pFNA) was performed on 370 nodules, and USFNA was done on 127. The USFNAs were performed for the following reasons: 95 (75%) for nonpalpable or difficult-to-palpate nodules; 14 (11%) for previously failed FNA; and 18 (14%) for incidentally detected nodules. FNA had an unsuccessful biopsy rate of 16% and a sensitivity and specificity of 89% and 69%, respectively. USFNA had an unsuccessful biopsy rate of 7% and a sensitivity and specificity of 100% and 100%, respectively. The cancer yield at surgery for pFNA was 40%, and the cancer yield at surgery for USFNA was 59%. The complementary use of USFNA with pFNA improves the diagnostic approach to nodular thyroid disease. The use of USFNA has increased the cancer yield at surgery and the sensitivity of thyroid biopsy at our institution.