OBJECTIVES: Respiratory syncytial virus remains one of the major reasons of re-hospitalization among early premature children (<29 weeks of gestational age [wGA], 29-32wGA) and children with chronic lung disease (CLD). This study estimated the cost-effectiveness of palivizumab prophylaxis versus placebo, in Mexico, from the societal perspective. METHODS: A decision-analytic model combining a decision tree structure in the first year and a Markov structure in later years was constructed to evaluate the benefits and costs associated with palivizumab among preterm children and children with CLD. In the first year, children were at risk of mild (i.e. medically attended) and severe (hospitalized) disease due to RSV infection. In later years of the model, children were at risk of developing asthma and allergic sensitization as sequelae of RSV disease. Input data for the model were derived from the pivotal clinical trial and systematic literature reviews. Indirect costs included parental absence from work, travel costs, and RSV nosocomial infections. Both costs (USD) and effects were discounted at 5%. Undiscounted results are presented as scenario analyses. RESULTS: For the <29wGA subgroup palivizumab prophylaxis was a dominant strategy, whereas for the 29-32wGA and CLD subgroups it yielded additional quality-adjusted life years (QALYs) at additional costs. In the base-case analysis, incremental costs for the <29wGA, 29-32wGA, and CLD subgroups were -$334, $708 and $2,420, respectively. Incremental QALYs for the <29wGA, 29-32wGA, and CLD subgroups were 0.081, 0.064 and 0.074, respectively. The ICERs for the discounted analyses were thus - $4,107/QALY, $11,042/QALY, $32,707/QALY, respectively. The corresponding figures in the undiscounted analysis were -$3,789/QALY, $3,185/QALY, and $11,353/QALY for the <29wGA, 29-32wGA and CLD subgroups, respectively. CONCLUSIONS: The model results demonstrated that palivizumab prophylaxis is a dominant prophylaxis strategy for early preterm children (<29wGA) and a cost-effective preventative treatment option for preterm children (29-32wGA) and children with CLD in Mexico.