OBJECTIVES: : To compare from the Swedish societal perspective the cost-effectiveness of paliperidone palmitate administered monthly (75mg eq every month) (PP) with olanzapine pamoate (150mg every 2 weeks or 300mg every 4 weeks) (OP). METHODS: A Markov decision analytic model was developed simulating a cohort of stable schizophrenia patients transitioning monthly through different health states over a lifetime (55 years). Probability of relapse, level of adherence, side-effects (extrapyramidal symptoms, tardive dyskinesia, weight gain and diabetes) and treatment discontinuation (switch) were derived from long-term observational data. Productivity losses were included in the analysis. Costs were expressed in 2011 Swedish Kronor (1 SEK ≈ 0,159 US dollar) with costs and benefits discounted at 3%. Drug costs were derived from the Swedish Pharmaceutical Benefits agency (TLV). Primary cost-effectiveness measures were the cost / QALY gained and cost / relapse avoided.  RESULTS: Compared to OP, PP is dominant: an increased effectiveness (additional QALYs = 2.097) and fewer relapses (0.395) at reduced costs (SEK 26 719) over a lifetime horizon. Results were robust when tested in 33 deterministic (DSA) and probabilistic sensitivity analyses (PSA) using 12 parameters with predefined distributions. The model was most sensitive to change in the risk ratio of relapse and the proportion of patients changing medication. PP dominated OP in 99 % of cases in QALYs gained and in 92 % of cases in relapses avoided. CONCLUSIONS: This cost-effectiveness analysis indicates that paliperidone palmitate has both economic (reduced costs) and clinical advantages (more QALYs, fewer relapses) compared with olanzapine pamoate in the long-term treatment of schizophrenia in Sweden.