To estimate the average annual cost of managing a patient with chronic hepatitis B (CHB) disease in Australia. Little is known about the prevalence or economic burden of hepatitis B viral (HBV) infection in Australia, despite it being recognized as a significant cause of morbidity and mortality. A retrospective analysis of 149 patients with CHB disease in six disease states (noncirrhotic CHB, compensated and decompensated cirrhosis, hepatocellular carcinoma, liver transplantation in year 1, and liver transplantation in subsequent posttransplantation years) was conducted. The cost of palliative care for 53 patients with chronic hepatitis and hepatocellular carcinoma was also estimated, based on data from a palliative care unit. The average annual costs (year-2001 AUS$) for each disease state per patient were: noncirrhotic CHB, 1233 dollars (95% CI 939 dollars-1544 dollars); compensated cirrhosis, 1394 dollars (95% CI 975 dollars-1797 dollars); decompensated cirrhosis, 11,961 dollars (95% CI 6993 dollars-18,503 dollars); liver transplantation in year 1, 144,392 dollars (SD, 115,374 dollars); liver transplantation in year 2+, 23,160 dollars (SD, 19,289 dollars); and hepatocellular carcinoma, 11,753 dollars (95% CI 7385 dollars-17,159 dollars). Within the noncirrhotic CHB group, the cost of managing active disease was 1778 dollars (95% CI 1212 dollars-2374 dollars) compared with 758 dollars (95% CI 519 dollars-1045 dollars) for inactive disease. The average cost of palliative care for patients with chronic hepatitis and hepatocellular carcinoma was 6307 dollars (95% CI 4848 dollars-8187 dollars). Multivariate statistical analysis indicated that age, sex, marital status, country of birth, and duration of follow-up were not statistically significant in explaining variation in costs. The cost of managing patients with CHB disease varies significantly between the noncirrhotic CHB/compensated cirrhosis states and the other four disease states. Within the noncirrhotic CHB state, there is also a significant difference between the cost of managing active and inactive disease. These results will be useful in future cost-effectiveness analyses of prevention and treatment options.