Aims. Cost-effectiveness analysis using life-years of survival as the measure of treatment benefit is widely used in the economic evaluation of health care interventions but has not been applied to substance abuse treatment. The cost-effectiveness of methadone maintenance was evaluated to demonstrate the feasibility of applying this method to substance abuse treatment. Design. A literature review was undertaken to determine the effect of methadone treatment on the rate of mortality associated with opiate addiction. Information was also obtained on the average cost and duration of treatment. A two-state Markov model was used to estimate the incremental effect of methadone on the life span and treatment cost of a cohort of 25-year-old heroin users. Findings. Providing opiate addicts with access to methadone maintenance has an incremental cost-effectiveness ratio of $5915 per life-year gained (that is, for every year of life that is saved by providing methadone to opiate addicts, an additional $5915 in treatment costs are incurred). One-way sensitivity analysis determined that the ratio was less than $10 000 per-life year over a wide range of modeling assumptions. Conclusions. The ratio determined for methadone is lower than that of many common medical therapies, and well within the $50 000 threshold for judging cost-effectiveness. Even if decision makers do not wish use the same ratio that is applied to the general population, this method allows substance abuse treatment enhancements to be compared to improvements in health services offered to individuals with substance abuse disorders. Future work will require information on the impact of methadone treatment on the cost of health care and public programs, the indirect costs incurred by patients, and adjustments to reflect quality of life.