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Objectives To perform an economic evaluation of a primary care-based physical activity counseling intervention that improved physical activity levels and rapid gait speed in older veterans. Design Secondary objective of randomized trial that assessed the effect of exercise counseling (relative to usual care) on physical performance, physical activity, function, disability, and medical resource use and cost. Setting Veterans Affairs Medical Center, Durham, North Carolina. Participants Male veterans aged ≥70 years (n = 398). Intervention An experienced health counselor provided baseline in-person exercise counseling, followed by telephone counseling at 2, 4, and 6 weeks, and monthly thereafter through one year. Each participant's primary care physician provided initial endorsement of the intervention, followed by monthly automated telephone messages tailored to the patient. Individualized progress reports were mailed quarterly. Measurements Intervention costs were assessed. Health care resource use and costs were estimated from enrollment through one year follow-up. The incremental cost of achieving clinically significant changes in major trial endpoints was calculated. Results The total direct cost of the intervention per participant was $459, 85% of which was counselor effort. With overhead, program cost totaled $696 per participant. Medical costs during follow-up reached $10,418 with the intervention, versus $12,052 with usual care (difference = −$1,634 (95% confidence interval = −$4,683 to $1,416; P = .29)). Expressed in terms of short-term clinical outcomes, the intervention cost $4,971 per additional patient reaching target exercise levels, or $4,640 per patient achieving a clinically significant change in rapid gait speed. Conclusion Improvements in physical activity and rapid gait speed in the physical activity counseling group were obtained at a cost that represents a small fraction of patients' annual health care costs. [ABSTRACT FROM AUTHOR]