Cost-effectiveness of routine postoperative radiotherapy after breast-conserving surgery has not been prospectively evaluated earlier. In times of rationing of medical resources, valid assessments of cost-effectiveness are important for rational allocation of resources. Cost and cost-effectiveness of routine postoperative radiotherapy was calculated in a prospective randomized trial comparing sector resection plus axillary dissection with (XRT group) or without (non-XRT group) postoperative radiotherapy in breast cancer stage I. Three hundred eighty-one patients were included. After a median follow-up of five years 43 local recurrences, six of them in the XRT-group occurred (P < 0.0001). No difference in regional and distant recurrence (P = 0.23) or survival (P = 0.44) was observed. Direct medical costs as well as indirect costs in terms of production lost during the treatment period and travel expenses were estimated from data in the medical records and the national insurance registry of each patient. Average costs of different treatment activities and measures were estimated for the XRT-group and the non-XRT group respectively. From these estimates differences in costs and effectiveness between the groups were calculated and marginal cost-effectiveness ratios were estimated. For the construction of QALYs each life-year was quality-adjusted by a utility value depending on which health state the patient was considered to perceive. Taking into account the cost of primary treatment, the cost of follow-up, the cost of treatment of a local recurrence, travel expenses and indirect costs (production lost) excluding costs for treatment of regional and distant recurrence the cost per avoided local recurrence at five years was SEK 337,727 ($44,438, Pounds 27,018). Adjustment for quality of life showed a cost for every gained QALY to be SEK approximately 1.6 million, ($210,526, Pounds 128,000), range SEK 0.2-3.9 million ($26,315-513,158, Pounds 16,000-312,000). The cost of routine postoperative radiotherapy after sector resection and axillary dissection in breast cancer stage I per avoided local recurrence and gained QALY is high. The cost per gained QALY show great variation depending on utility value, which in this study was derived from external observers and not from the patients themselves. These results stress the importance of identifying risk factors for local recurrence, better understanding of impact on quality of life of a local recurrence and adding cost evaluations to clinical trials in early breast cancer.