OBJECTIVES: In Australia, sirolimus is indicated where withdrawal of cyclosporin (CsA) is appropriate and intended within four months of renal transplantation. In one clinical trial, patients randomized three months after transplantation experienced significantly lower nephrotoxicity and serum creatinine (SC) with sirolimus and CsA withdrawal compared to a combined low-dose sirolimus and CsA regimen. The long-term cost-effectiveness of sirolimus was estimated in a cost-utility analysis based on this trial. METHODS: A Markov model was used to estimate sirolimus' impact on health outcomes and direct costs to the Australian health system for a patient's lifetime. Graft survival rates were derived from the clinical trial data (years 1-3), extrapolated from 6-month SC using Australia and New Zealand Dialysis and Transplant Registry (ANZDATA) estimates (years 4-6) and assumed an exponential decay function (years 7+). Probabilities of regraft, acute rejection and death were derived from the clinical trial and ANZDATA data. Quality-adjusted life years (QALYs) were the product of years with a functioning or failed graft and time trade-off derived utilities for those health states. Resource consequences included immunosuppressants and inpatient and outpatient services, and were verified by a panel of clinical experts. Estimated costs were mean national costs to the Australian health system. RESULTS: With CsA withdrawal, the estimated lifetime cost of immunosuppressants is $61,804 greater, the cost of events $35,333 lower, and 0.447 additional QALYs are accrued (per-patient means). The base case cost per additional QALY gained over combination therapy is $59,259 and most sensitive to the cost and disutility associated with dialysis. CONCLUSIONS: Sirolimus is associated with greater SC reduction than CsA and is thereby expected to lead to higher rates of graft and patient survival. It is estimated that with CsA withdrawal, sirolimus will reduce lifetime health care costs, increase quality-adjusted survival, and is potentially cost-effective for recently transplanted patients.