STUDY OBJECTIVES: To calculate cost-effectiveness of scenarios concerning lung transplantation in The Netherlands. DESIGN: Microsimulation model predicting survival, quality of life, and costs with and without transplantation program, based on data of the Dutch lung transplantation program of 1990 to 1995. SETTING: Netherlands, University Hospital Groningen. PATIENTS: Included were 425 patients referred for lung transplantation, of whom 57 underwent transplantation. INTERVENTION: Lung transplantation. RESULTS: For the baseline scenario, the costs per life-year gained are G 194,000 (G=Netherlands guilders) and the costs per quality-adjusted life-year (QALY) gained are G 167,000. Restricting patient inflow ("policy scenario") lowers the costs per life-year gained: G 172,000 (costs per QALY gained: G 144,000). The supply of more donor lungs could reduce the costs per life-year gained to G 159,000 (G 135,000 per QALY gained; G1 =US $0.6, based on exchange rate at the time of the study). CONCLUSIONS: Lung transplantation is an expensive but effective intervention: survival and quality of life improve substantially after transplantation. The costs per life-year gained are relatively high, compared with other interventions and other types of transplantation. Restricting the patient inflow and/or raising donor supply improves cost-effectiveness to some degree. Limiting the extent of inpatient screening or lower future costs of immunosuppressives may slightly improve the cost-effectiveness of the program.