OBJECTIVES: To undertake an economic evaluation of the costs and outcomes of midwifery group practice care compared with usual care in an Australian metropolitan hospital. METHODS: In a cohort study, pregnant women at low risk of complications could select to receive midwifery group practice care or usual care early in their pregnancy and were recruited when they were 35 weeks pregnant. Midwifery group practice provides care by the same 2-3 midwives and labour in a birth centre. Usual care consists of women generally attending a GP or midwives antenatal clinic for antenatal care, followed by labour in the hospital. Costing data was collected from week 36 of pregnancy until 6 weeks postpartum. Costing for antenatal, labour, baby and postnatal care were collected using the hospital accounting system. Women kept a diary with the number of antenatal and postnatal visits. Costing data on GP visits were calculated using the diaries and government reimbursement costs. RESULTS: The study included 102 women, with 52 women receiving midwifery group practice care and 50 women receiving usual care. Midwifery group practice care was associated with fewer antenatal visits, lower rate of induction and pharmacological pain relief, shorter stay in hospital and more postnatal visits. There were no statistical differences in clinical outcomes of the baby.  The cost of antenatal care was similar between the groups; labour and baby costs were lower for midwifery group practice, while postnatal costs were higher in the midwifery group practice. Midwifery group practice was associated with a lower total cost per woman compared to usual care (A$4447 vs. A$5772, p=0.047).  CONCLUSIONS:  For women at low risk of complications midwifery group practice is a cost-effective option, with better clinical outcomes and lower total costs.