OBJECTIVES: To examine whether terbinafine or itraconazole is a more cost-effective treatment for onychomycosis in an institutional setting in Mexico. METHODS: A cost-effectiveness analysis was designed; a decision tree with bayesian approach was used to model the cost-effectiveness of terbinafine vs. itraconazole in the treatment of onychomycosis in Mexico. The perspective was from the Mexican Institute of Social Security (IMSS). Discount rate was not used because the time horizon was less than 1 year. Resource use data was taken from IMSS. Cost data for medications was obtained from a local drug distributor database (NADROSA Aug 2009), assuming terbinafine dosing scheme as 250 mg daily for 3 months, and itraconazole dosing scheme as 400 mg daily for 7 days every 4 weeks for 3 months (pulse dosing scheme). Cost data for physician consult was estimated as a fixed-variable. As this analysis was performed from an institutional perspective, no other costs were identified to be required for the treatment of onychomycosis. Using data from the L.I.O.N. clinical study, mycological cure success rates were estimated for both treatments as first options; for mycological cure failures, re-treatment costs were estimated using a second terbinafine scheme in both groups and an additional physician consult. Total costs per patient were determined and incremental cost-effectiveness ratios were calculated. A Monte Carlo (100,000 iterations) simulation was performed to reduce the error <0.03. A probabilistic sensitivity analysis was performed. RESULTS: The incremental cost analysis revealed a total cost of $3823 for terbinafine vs. $7152 for itraconazole (both in Mexican pesos, p<0.001) per patient successfully treated. Terbinafine provides superior total health benefits than itraconazole regardless of willingness to pay. The  sensitivity analysis confirmed the robustness of the model. CONCLUSIONS: From an institutional perspective, terbinafine is a more cost-effective (dominant) choice than itraconazole for treating onychomycosis in Mexico.