Objective: This study was undertaken to determine the cost per quality - adjusted life-year gained with lung transplantation relative to medical treatment for end-life-stage lung disease in the United Kingdom. Methods: Patients on the transplant waiting list were used to represent medical treatment. Four-year national survival data were extrapolated to 15 years by means of parametric techniques. Quality-adjusted life-years were derived by means of utility scores obtained from a cross-section of patients. Resource consumption and costs were based on local and national sources. Costs and benefits were discounted at an annual rate of 6%. Results: Across a 15-year period lung transplantation yielded mean benefits (relative to medical treatment) of 2.1, 3.3, and 3.6 quality-adjusted life-years for single-lung, double-lung, and heart-lung transplantation, respectively. During the same period the mean cost of medical treatment was estimated at $73,564, compared with $176,640, $180,528, and $178,387 for single-lung, double-lung, and heart-lung transplantation, respectively. The costs per quality-adjusted life-year gained were $48,241 for single-lung, $32,803 for double-lung, and $29,285 for heart-lung transplantation. Sensitivity analysis found the principal determinants of cost-effectiveness to be quality of life and maintenance costs after transplantation. Conclusions: Lung transplantation results in survival and quality of life gains but remains expensive, with cost-effectiveness limited by substantial mortality and morbidity and high costs. The cost-effectiveness of lung transplantation can be improved with lowered immunosuppression costs and improvements in quality of life after transplantation.