In two recent randomised clinical trials, a meta-analysis and in an effectiveness study analysing routine data from the U.S. Veterans Administration the superiority of the newer atypical drugs over typical antipsychotic drugs, concerning both their efficacy and their side-effect profile, has been questioned.To analyse the effectiveness and cost of atypical versus typical antipsychotic treatment for schizophrenia in routine care.Cohort study using routine care data from a statutory sickness fund with 5.4 million insured in Germany. To be included, patients had to be discharged with a diagnosis of schizophrenia in 2003 and fulfil membership criteria. Main outcome measures were rehospitalisation rates, mean hospital bed days, mean length of stay, cost of inpatient and pharmaceutical care to the sickness fund during follow-up and medication used to treat side-effects.3121 patients were included into the study. There were no statistically significant differences in the effectiveness of atypical and typical antipsychotics on rehospitalisation during follow-up (rehospitalisation rate ratio 1.07, 95% confidence interval 0.86 to 1.33). However, there were consistent observations of atypical antipsychotics being more effective for severe cases of schizophrenia (14.6% of study population; >61 prior bed days per year in 2000-2002) in the follow-up period, whereas for the other severity strata typical antipsychotics seemed more effective in reducing various rehospitalisation outcomes. Patients treated with atypical antipsychotics received significantly less prescriptions for anticholinergics or tiaprid (relative risk 0.26, 95% confidence interval 0.18 to 0.38).The effectiveness of atypical antipsychotics for schizophrenia on rehospitalisation measures appeared similar to that of typical antipsychotics. With the exception of severe cases, the higher costs for atypical antipsychotics were not offset by savings from reduced inpatient care. Major limitations include the lack of statistical power for subgroup analyses, the lack of clinical severity scale data and of life-course medical history data which both increase the risk of residual confounding by disease severity.This study provides evidence that the effectiveness of atypical and typical antipsychotics measured in terms of hospital readmissions appears to be similar in routine care.From a clinical perspective, this study provides evidence that the effectiveness of atypical and typical antipsychotics measured in terms of hospital readmissions appears to be similar in routine care.Routine data studies can yield valuable information for policy decision-makers on the costs and the effectiveness of pharmaceuticals in routine care, complementing efficacy data from randomised clinical trials currently used for licensing and reimbursement decisions.The non-significant differences in the effectiveness of atypical compared to typical antipsychotics according to severity of disease should be investigated in a prospective observational study or in a randomised clinical trial.