OBJECTIVES: The aim of this study was to compare the cost-utility of hemodialysis (HD) and peritoneal dialysis (PD) as the initial modality of renal replacement therapy in Brazil.  METHODS: We performed a retrospective cohort study using national administrative registries of all patients who began dialysis in 2000 through 2003 in Brazil. Propensity scores were calculated for the first treatment assignment from a large number of baseline covariates. The monthly expenditure per patient was estimated by summing all paid values extracted from the cohort. A utility measure was obtained from a nationwide observational cross-sectional study conducted in 2007. The Markov model was utilized to estimate the life-years gained (LYG), quality adjusted life-years (QALY) and the projected costs for 10 years. The Brazilian Public Health System perspective was considered. RESULTS: Our cost-utility study demonstrated superior performance of hemodialysis compared to peritoneal dialysis. As the initial modality, HD presented an incremental cost-effectiveness ratio (ICER) of US$ 14,833.05 per LYG; the incremental cost of PD was US$ 2,473.83. However, after 10 years, 92.5% of patients who started on HD and 95.8% who started on PD had died. CONCLUSIONS: Based on population data for the two methods currently used for the primary treatment of chronic kidney failure in Brazil, our analysis demonstrated that HD is superior to PD in terms of costs and QALY