A safe, effective vaccine for chickenpox (varicella zoster) is available. However, some countries do not consider varicella vaccination a priority when compared with other childhood infectious diseases. It is important to Portuguese health policy to determine the economic value of vaccinating healthy children against chickenpox. OBJECTIVE: To estimate the cost-effectiveness of universal varicella vaccination compared with vaccination on demand. Design: Cost-utility analysis. Data sources: Costs were estimated from government sources (Administração Regional de Saúde de Lisboa e Vale do Tejo); vaccine efficacy data and utility values were derived from reports of clinical studies published in the peer-reviewed literature. Target Population: Portuguese children age 15 month. Time Horizon: Ten years. Perspective: Societal. Interventions: Universal vaccination as part of the National Vaccination Programme or the current situation in which vaccination is given on demand to children whose parents request it or can afford to pay for it. Outcomes measures: Costs, quality-adjusted life years (QALYs), cases of chickenpox prevented, and average cost-effectiveness ratios. Results of Base-Case Analysis: The average cost-effectiveness ratio proved to be dominant for the universal program compared with the actual situation. The cost per QALY is €16 or for each case prevented of €23. On demand vaccination is dominated by a the universal vaccination option, costing more and resulting in fewer QALYs and cases of chickenpox prevented. No substantive alteration of the base-case was noticed in a sensitivity analysis. CONCLUSIONS: A universal varicella vaccination program would be expected to improve quality of life and reduce the health care expenditures when used in young children.