Rationale: Daily oral azithromycin therapy can reduce the risk of acute exacerbations of chronic obstructive pulmonary disease (COPD). However, given its adverse events and additional costs, it is not known whether adding long-term azithromycin as an adjunct therapy to inhaled pharmacotherapy is cost effective. Objectives: The objective of this study was to evaluate the cost-effectiveness of add-on azithromycin therapy in COPD as recommended by contemporary COPD management guidelines. Methods: We extended a previously validated Canadian COPD policy model to include azithromycin-related inputs and outcomes. The cost-effectiveness of azithromycin was evaluated over a 20-year time horizon in patients who continue to exacerbate despite receiving maximal inhaled therapies. The benefit of azithromycin was modeled as a reduction in exacerbation rates. Adverse events included cardiovascular death, hearing loss, gastrointestinal symptoms, and antimicrobial resistance. The incremental cost-effectiveness ratio (ICER) was calculated with costs in 2020 Canadian dollars ($) and quality-adjusted life-years (QALYs) discounted at 1.5% per year. The analysis was stratified among patient subgroups based on exacerbation histories. Results: In patients with a positive exacerbation history (one or more events in the previous 12 mo), azithromycin was associated with $49,732 costs, 7.65 QALYs, and 10.95 exacerbations per patient over 20 years. The corresponding values were $48,436, 7.62, and 11.86 for the reference group, resulting in an ICER of $43,200 per QALY gained. In patients defined as frequent exacerbators (two or more moderate or one or more severe events in the past 12 mo), the ICER was reduced to $8,862 per QALY gained. In patients with no history of exacerbation, azithromycin had lower QALYs and higher costs than the reference group. Conclusions: Add-on azithromycin is cost effective in patients with a recent history of exacerbations at commonly accepted willingness-to-pay thresholds of $50,000-$100,000/QALY. Guidelines should consider recommending add-on azithromycin for patients who had at least one moderate or severe exacerbation in the past year, albeit more information about treatment efficacy would strengthen this recommendation.