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Purpose: The purpose of this study was to compare the cost-effectiveness of dietary and exercise interventions in overweight or obese elderly patients with knee osteoarthritis (OA) enrolled in the Arthritis, Diet, and Physical Activity Promotion Trial (ADAPT)., Methods: ADAPT was a single-blinded, controlled trial of 316 adults with knee OA, randomized to one of four groups: Healthy Lifestyle Control group, Diet group, Exercise group, or Exercise and Diet group. A cost analysis was performed from a payer perspective, incorporating those costs and benefits that would be realized by a managed care organization interested in maintaining the health and satisfaction of its enrollees while reducing unnecessary utilization of health care services., Results: The Diet intervention was most cost-effective for reducing weight, at $35 for each percentage point reduction in baseline body weight. The Exercise intervention was most cost-effective for improving mobility, costing $10 for each percentage point improvement in a 6-min walking distance and $9 for each percentage point improvement in the timed stair climbing task. The Exercise and Diet intervention was most cost-effective for improving self-reported function and symptoms of arthritis, costing $24 for each percentage point improvement in subjective function, $20 for each percentage point improvement in self-reported pain, and $56 for each percentage point improvement in self-reported stiffness., Conclusions: The Exercise and Diet intervention consistently yielded the greatest improvements in weight, physical performance, and symptoms of knee OA. However, it was also the most expensive and was the most cost-effective approach only for the subjective outcomes of knee OA (self-reported function, pain, and stiffness). Perceived function and symptoms of knee OA are likely to be stronger drivers of downstream health service utilization than weight, or objective performance measures and may be the most cost-effective in the long term.