OBJECTIVES: Standard treatment for localized prostate cancer is radical prostatectomy (PE) or radiation therapy (RT) which frequently cause erectile dysfunction (ED) and incontinence (IC). As tumor progression often is slow, active surveillance (AS) has been proposed as an alternative treatment strategy. This study compares the cost-effectiveness of the three treatment strategies in a German context. METHODS: Based on claims data of a German sickness fund we analyzed men diagnosed with prostate cancer (ICD-10 code C61) in 2008. Life years gained and complication rates of ED and IC as well as costs of inpatient and outpatient treatment, pharmaceuticals, physical therapy, medical aids and co-payments were tracked for 2.5 years after the initial treatment. An excess-cost analysis was applied. Strategies were compared in an age-matched and comorbidity-adjusted approach. RESULTS: The baseline study sample included 25,376 individuals. Exclusion of metastases, other cancer diagnoses and treatment strategies resulted in 910 men with PE, 292 with RT and 124 with AS. After matching 107 men remained in the AS group and 214 each in the PE and RT groups with a mean age of 70 years. Risk of long-term ED (PE: 0.112, RT: 0.009, AS: 0.056) and IC (PE: 0.313, RT: 0.009, AS: 0.084) was highest in the PE group. Compared to RT and AS, PE was associated with more life years gained during the cause of the study. Due to high inpatient costs of the initial surgery PE had ca. €11,000 higher total per capita costs than RT and AS. CONCLUSIONS: The analysis indicates that PE is associated with better prognosis and higher overall costs compared to RT and AS. 2.5 years follow-up might, however, not be enough to detect prostate cancer-specific deaths.