OBJECTIVES: To evaluate the costs and benefits of two new agents, respiratory syncytial virus immune globulin (RSVIG) and palivizumab, to prevent respiratory syncytial virus (RSV) infection among premature infants discharged from the neonatal intensive care unit (NICU) before the start of the RSV season. Method. Decision analysis was used to compare the projected societal cost-effectiveness of three strategies-RSVIG, palivizumab, and no prophylaxis-among a hypothetical cohort of premature infants. Probabilities and costs of hospitalization were derived from a cohort of 1721 premature infants discharged from six Kaiser Permanente-Northern California NICUs. Efficacies of prophylaxis were based on published trials. Costs of prophylaxis were derived from published sources. Mortality among infants hospitalized for RSV was assumed to be 1.2%. Future benefits were discounted at 3%. RESULTS: Palivizumab was both more effective and less costly than RSVIG. Cost-effectiveness varied widely by subgroup. Palivizumab appeared most cost-effective for infants whose gestational age was =32 weeks, who required >/=28 days of oxygen in the NICU, and who were discharged from the NICU from September through November. In this subgroup, palivizumab was predicted to cost $12,000 per hospitalization averted (after taking into account savings from prevention of RSV admissions) or $33,000 per life-year saved, and the number needed to treat to avoid one hospitalization was estimated at 7.4. However, for all other subgroups, ratios ranged from $39,000 to $420,000 per hospitalization averted or $110,000 to $1,200,000 per life-year saved, and the number needed to treat extended from 15 to 152. The results were sensitive to varying assumptions about the cost and efficacy of prophylaxis, as well as the probability of hospitalization, but were less sensitive to the cost of hospitalization. CONCLUSION: In our model, the cost of prophylaxis against RSV for most subgroups of preterm infants was high relative to the benefits realized. Lower costs might permit the benefits of prophylaxis to be extended to additional groups of preterm infants.