BACKGROUND We performed a cost-benefit analysis of a protocol for studying patients with squamous intraepithelial lesions (SIL) on Papanicolaou smears to determine whether it compared favorably with resources spent on other health programs for screening and treatment. METHODS During a 3-year period, 424 patients with dysplastic Papanicolaou smears were examined, studied by biopsy, and treated. We calculated costs based on a model protocol and derived a cost per year of life saved for preventing death from invasive cervical carcinoma. A sensitivity analysis was performed on selected assumptions of the analysis. RESULTS The marginal, or incremental, cost of colposcopic evaluation and treatment of Papanicolaou smears with low-grade SIL, high-grade SIL (moderate), and high-grade SIL (severe), depending on assumptions, ranged from $406 to $5746, $160 to $2263, and $85 to $1197 per year of life saved, respectively. Depending on the assumption of the rate of Papanicolaou smears with SIL in the screened population being 1.8%, 5.1%, or 11.5%, the estimated total cost of screening and treating the referral base was $1.3 million, $538,126, and $307,037, respectively. This results in the average cost per year of life saved to screen and treat low-grade SIL, high-grade SIL (moderate), and high-grade SIL (severe) to be $1105 to $68,909, $375 to $21,673, and $177 to $8831, respectively. CONCLUSIONS Both marginal cost and average screening costs of evaluating and treating abnormal Papanicolaou smears by the protocol described in this article compare favorably with costs per year of life saved for other health care screening and treatment strategies for many assumptions. The marginal cost to perform colposcopy on patients with a Papanicolaou smear with low-grade SIL is so low that it is relatively a very effective strategy.