OBJECTIVE To compare the costs and effectiveness of intensity-modulated radiotherapy (IMRT) with three-dimensional conformal radiotherapy (3DCRT) for the radical treatment of localised prostate cancer at elevated doses (>70 Gy). METHODS A cost-effectiveness analysis model was developed using clinical effectiveness estimates from a systematic review. The base case analysis assumes equal biochemical survival for IMRT and 3DCRT, but lower frequency of gastrointestinal toxicity for IMRT. The costs of IMRT and 3DCRT were estimated through activity-based costing, incorporating input from radiation oncologists, physicists and treatment planners. RESULTS The delivery of IMRT produced 0.023 more quality-adjusted life-years (QALY) than 3DCRT at an additional cost of $621 (QALY and costs discounted at 5% per year), yielding an incremental cost-effectiveness ratio of $26 768 per QALY gained. The treatment cost of IMRT was $1019 more than 3DCRT, but IMRT resulted in less frequent gastrointestinal toxicity, thus avoiding $402 in the treatment of toxicity. In the scenario that compared a higher dose of IMRT (75.6 Gy) to 3DCRT (68.4 Gy), IMRT improved disease control with equal toxicity incidence, and the IMRT strategy dominated (less costly and more effective). In the base case scenario (no survival difference), the cost-effectiveness of IMRT was most sensitive to the treatment cost difference between IMRT and 3DCRT. CONCLUSIONS For radical radiation treatment (>70 Gy) of prostate cancer, IMRT seems to be cost-effective when compared with an equivalent dose of 3DCRT.