Chronic obstructive pulmonary disease (COPD) is associated with a large economic and social burden. Few economic studies have examined the benefits of inhaled therapy for patients with COPD. This 16-week study examined the cost-effectiveness of salmeterol in this patient group. Patients with a history of COPD were randomised to treatment with salmetrol 50 mcg (229 patients) or placebo (227 patients) twice daily administered by metered-dose inhaler in addition to normal therapy. Forced expiratory volume (FEV1) was measured and patients recorded the impact of their symptoms in a daily diary. Health status was assessed using the St Georges Respiratory Questionnaire. A significantly higher proportion of salmeterol-treated patients had an increase of >15% in FEV1. Salmeterol patients had a higher mean proportion of symptom-free days and nights than those in the placebo group. More salmeterol patients had a clinically significant improvement in health status. Total healthcare costs were increased in the salmeterol group, but hospital and GP visit costs and concurrent COPD medication costs were lower. The reduction in hospital costs was sufficient to offset a substantial portion of the acquisition cost of salmeterol. Addition of salmeterol to COPD patients' current therapy improved lung function, health status at the expense of a modest increase in costs compared with usual therapy.