Radiation necrosis is becoming an increasingly prevalent complication in patients with brain tumors given the growing utility of stereotactic radiosurgery in modern treatment paradigms. Magnetic resonance-guided laser interstitial thermal therapy (MRgLITT) is a new minimally invasive modality that has exhibited an efficacy comparable to craniotomy in treating radiation necrosis. No studies to date have compared their cost-effectiveness despite the significant additional expenses associated with MRgLITT use. This study aimed to evaluate the cost-effectiveness of MRgLITT versus craniotomy in patients with comparable presentations of radiation necrosis. The National Inpatient Sample (NIS) was queried from 2011 to 2020 for patients with radiation necrosis and treated using craniotomy or MRgLITT. Admission charges and costs were inflation adjusted to 2020 $US. Surgical cohorts were propensity score-matched according to demographic, clinical, and admission characteristics. Multivariable linear and logistic regression analyses identified associations between type of intervention and outcomes. A semi-Markov model was created to simulate treatment with craniotomy versus MRgLITT. Cost, transition probabilities, and health state utilities were derived from the NIS, individual patient outcomes from multiple institutions, and prospectively collected quality-of-life data from a single institution and verified against other studies. Monte Carlo simulation and probabilistic sensitivity analysis were used to evaluate the cost-effectiveness between the two modalities. In the designated study period, 2869 patients had been admitted with brain tumor radiation necrosis and were managed with neurosurgical intervention. After propensity score matching, MRgLITT, relative to craniotomy, was independently associated with a shorter length of stay (LOS; β = -1.81, p = 0.002), lower odds of complications (OR 0.18, p = 0.033), and higher odds of home discharge (OR 3.05, p = 0.041), but there was no difference in total admission costs between the two modalities (β = $6229, p = 0.081). On Monte Carlo simulation, patients treated with MRgLITT had a lower probability of disease (radiation necrosis or tumor) recurrence (13.5% vs 22.0%, p < 0.001) but an equivalent mortality risk (22.8% vs 22.3%, p = 0.429) compared to the patients treated with craniotomy at the 1-year follow-up. Over a 4-year time horizon, MRgLITT had an incremental cost of -$25,685 and incremental effectiveness of 0.14 quality-adjusted life-year (QALY), resulting in an incremental cost-effectiveness ratio of -$183,464 per QALY relative to craniotomy. MRgLITT was a more cost-effective treatment strategy than craniotomy in the management of patients with brain tumor radiation necrosis. The cost-effectiveness of MRgLITT may be attributed to a shorter LOS, lower complication odds, and higher home discharge odds in the immediate postoperative period and a lower risk of disease recurrence over the long-term follow-up.