OBJECTIVES: Worldwide prevalence of overactive bladder (OAB) is close to 10% in adults. The urgent feeling to go to the toilet, frequency of voids and urinary incontinence affects lifestyle and productivity of patients. The aim of this study was to estimate the cost-effectiveness of tolterodine in the managing of OAB from an institutional perspective METHODS: A four-state Markov model was performed to estimate health and economic consequences during a time horizon of one year (one-month cycles). Effectiveness measures were mean percentage reduction in: number of voids per day, number of urinary urgency events per day and number of urinary incontinence events per day. Transition probabilities were obtained from a meta-analysis employing international published literature. Comparators were tolterodine (2 mg bid) and tablets of oxybutynin (5 mg tid) as reference treatment. Resource use was obtained from the Instituto Mexicano del Seguro Social (IMSS) databases (n=377 cases). Costs were extracted from institutional (IMSS) official sources. Costs included: visits to general practitioners and urologists, hospitalization, drugs, medical procedures, laboratory tests, imagenology and adverse events management. Probabilistic sensitivity analyses were performed employing bootstrapping techniques. Acceptability curves were constructed. RESULTS: Tolterodine and oxybutynin annual costs per patient were: US$1,654.55 [95%CI US$1,486.97-US$1,822.13] and US$1,537.38 [95%CI US$1,389.42-US$1,685.33], respectively (p>0.05). Tolterodine exhibits better outcomes than reference in all effectiveness measures considered (p<0.05). Incremental cost-effectiveness ratios for additional percentage reduction of: number of voids, events of urinary urgency and events of urinary incontinence were: US$1,307.34 [95%CI US$1,268.73-US$1,345.96]; US$1,091.39  [95%CI US$1,059.15-US$1,123.62] and US$ 2,915.31 [95%CI US$2,829.14-US$3,001.42], respectively. Acceptability curve showed that the probability of tolterodine being cost-effective is close to one at a willingness to pay of US$3,170 (regarding percent reduction of number of voids). CONCLUSIONS: Tolterodine is more effective than oxybutynin with similar treatment costs representing a more efficient alternative in the management of OAB at the IMSS.