OBJECTIVES: Adverse health effects resulting from tobacco smoking are associated with a significant economic burden and could be reduced through smoking-related health risk awareness programs. The purpose of this paper is to measure health care costs savings achievable by reducing smoking prevalence, and to simulate the costs and benefits of an awareness program. METHOD: A regression analysis was performed to link the prevalence of smoking and the number of cigarettes smoked daily by smokers to the incidence of: 1) lung cancer; 2) cancer of the mouth; 3) heart disease; 4) cerebro-vascular disease; and 5) chronic obstructive pulmonary disease (COPD) in Canada based on data from Statistics Canada (smoking prevalence) and Health Canada (medical conditions). For each condition, the reduction in the number of cases following a decrease in smoking prevalence and in the number of cigarettes smoked was estimated, and health care costs savings were calculated with condition-specific unit cost estimates. The impact of a smoking reduction program was simulated based on the impact of such programs in the US, and its costs compared with resulting health care costs savings. RESULTS: A one percent reduction in smoking prevalence in Canada is associated with a reduction of 62 cases of cancer of the mouth, 98 lung cancer cases, 2835 heart disease cases, 592 cerebrovascular disease cases, and 1263 COPD cases. These translate into health care cost savings of $65.7CAN millions annually. Based on these estimates, a 10-year smoking reduction program with costs and impact similar to that implemented in California in the 1990s would have a net benefit ranging from CAN $1.7 billion to CAN $3.7 billion. CONCLUSIONS: Smoking is statistically related to many health conditions and health care costs associated with these conditions can be reduced through decreased smoking. Tobacco-reduction programs would yield substantial net benefits to the Canadian government.