1Royal Free Centre for HIV Medicine, Department of Primary Care and Population Sciences, Royal Free and University College Medical School, London, UK,2NPMS-HHC, St. Stephen's Centre, Chelsea and Westminster Hospital, London, UK,3Global Health Outcomes, Glaxo Wellcome R and D, Greenford, Middlesex, UK,4Royal Free Centre for HIV Medicine, Department of Thoracic Medicine, Royal Free Hospital, London, UK and Joint Departments of Epidemiology, Biostatistics and Occupational Health, McGill University, Montreal, Canada Objective To assess the cost-effectiveness of highly active antiretroviral therapy (HAART) compared with two nucleoside reverse transcriptase inhibitors (NRTIs) for HIV infected individuals. Design Different data sources on the clinical effects and costs of treatments were combined using a Markov model. Setting English HIV treatment centres. Perspective UK public finance. Interventions HAART – dual NRTI therapy plus a protease inhibitor or a non-nucleoside reverse transcriptase inhibitor – vs. dual NRTI therapy. Participants Hypothetical cohorts of 1000 individuals infected with HIV. Outcome measures Projected life expectancy, cost-effectiveness in UK£ per life-year saved and per quality-adjusted life-years (QALYs) saved. Results Assuming a 2-year additional treatment effect of therapy with HAART produced incremental cost-effectiveness ratios of £14 602 per life-year saved and £17 698 per QALY saved. Conclusions The results were sensitive to a number of assumptions including the cost of HAART and the discount rate, but they suggest that the use of HAART in England is at least moderately cost-effective compared with treatment with two NRTIs alone.