OBJECTIVE: Clinical studies have demonstrated that high dose adjuvant interferon therapy improves disease-free and overall survival among high-risk (stage IIb and stage III) melanoma patients. Sentinel lymph node mapping (SLM) identifies metastasis and more accurately differentiates between stage II patients at high risk, who then might benefit most from adjuvant interferon therapy. We analyzed the cost-effectiveness of first testing with sentinel lymph node mapping (SLM) and then treating with adjuvant interferon (IFN) therapy for stage II melanoma. METHODS: We used a decision analytic model to compare four strategies for stage II patients after surgical excision of their melanoma: 1) treat all with low dose IFN; 2) test first with SLM and then treat only those with positive micrometastasis with high dose IFN; 3) test first with SLM and treat positives with high dose and negatives with low dose IFN (test and treat appropriately); 4) treat no one. Treatment, toxicity, follow-up and relapse costs were included. The primary outcome was cost per quality adjusted life year (QALY). RESULTS: Our analyses show that it is cost-effective to first test with SLM and treat appropriately compared to treating all with low dose IFN ($12,400/QALY). Moreover, it is cost-effective to test and treat appropriately vs. test and only treat some with high dose ($27,100/QALY). It is also more cost-effective to test and treat appropriately compared to no treatment ($31,700/QALY). CONCLUSION: Appropriate dosing of IFN therapy based on the results of sentinel lymph node mapping is a cost-effective strategy for stage II melanoma patients.