Guidelines for colorectal cancer screening and surveillance in people at average risk and at increased risk have recently been published by the American Gastroenterological Association. The guidelines for the population at average risk were evaluated using cost-effectiveness analyses. Since colorectal cancers primarily arise from precancerous adenomas, a state transition model of disease progression from adenomatous polyps was developed. Rather than assuming that polyps turn to cancer after a fixed interval (dwell time), such transitions were modeled to occur as an exponential function of the age of the polyps. Screening strategies included periodic fecal occult blood test, flexible sigmoidoscopy, double-contrast barium enema, and colonoscopy. Screening costs in 1994 dollars were estimated using Medicare and private claims data, and clinical parameters were based upon published studies. Cost per life-year saved was $12,636 for flexible sigmoidoscopy every 5 years and $14,394 for annual fecal occult blood testing. The assumption made for polyp dwell time critically affected the attractiveness of alternative screening strategies. Sigmoidoscopy every 5 years and annual fecal blood testing were the two most cost-effective strategies, but with low compliance, occult blood testing was less cost-effective. Lowering colonoscopy costs greatly improved the cost-effectiveness of colonoscopy every 10 years.