OBJECTIVES: A capecitabine (Xeloda®) chemotherapy combination regimen has been shown to be non-inferior in terms of comparative effectiveness and safety over 5-Fluorouracil (5-FU) combination chemotherapy in advanced oesophago-gastric cancer (eGC).  The objective of this economic evaluation, which was based on two randomised phase III, non-inferiority clinical trials, REAL-2 and ML17032, was to compare the direct medical costs to the Australian health care system of capecitabine (X) versus 5-FU (F), when used in combination with epirubicin plus cisplatin (EC) as triplet therapy (ECX versus ECF), and when used in combination with cisplatin as doublet therapy (CX vs CF). METHODS: Direct medical costs were estimated for five treatment settings from both a public and private hospital perspective.  Costs included in the economic evaluation were costs of drug acquisition (calculated using trial-based mean cumulative doses), drug preparation (5-FU), drug administration and drug wastage.  The cost of drug acquisition was calculated based on dosage data and the mean number of treatment cycles from the REAL-2 and ML17032 trials.  There were no costs associated with preparing capecitabine.  An Oncology Grouping and Costing Study was performed to determine the relevant administration costs associated with a central venous access device, its placement, maintenance and removal (as required for 5-FU administration) and the continuous infusion of 5-FU via a Continuous Ambulatory Delivery Device pump or infuser.   RESULTS: This economic evaluation has shown that treating advanced eGC patients with capecitabine in a triplet and a doublet chemotherapy combination results in average cost savings of $5,291 and $2,142 respectively, when compared with 5-FU.  A multi-way sensitivity analysis demonstrated that the use of capecitabine remained cost-saving from an Australian government health budget perspective ($1765 and $340, respectively). CONCLUSIONS: The use of capecitabine, compared with 5-FU, for the treatment of advanced eGC is cost-saving from an Australian government health budget perspective.