Background Tauroselcholic [75selenium] acid (SeHCAT™) (GE Healthcare, Chicago, IL, USA) is a radiopharmaceutical that may be useful in diagnosing bile acid diarrhoea. Objectives To assess the clinical effectiveness and cost-effectiveness of SeHCAT for the investigation of adults with chronic unexplained diarrhoea, diarrhoea-predominant irritable bowel syndrome or functional diarrhoea (suspected primary bile acid diarrhoea), and adults with chronic diarrhoea and Crohn’s disease who have not undergone ileal resection (suspected secondary bile acid diarrhoea). Methods Sixteen databases were searched to November 2020. The review process included measures to minimise error and bias. Results were summarised by primary or secondary bile acid diarrhoea and study quality was considered. The cost-effectiveness analysis combined a short-term (6-month) decision-analytic model (diagnosis and initial treatment response) and a lifetime Markov model comprising three health states (diarrhoea, no diarrhoea and death), with transitions determined by probabilities of response to treatment. Analyses were conducted from an NHS and Personal Social Services perspective. Results Twenty-four studies were included in this review. Of these, 21 were observational studies, reporting some outcome data for patients treated with bile acid sequestrants, and in which only patients with a positive SeHCAT test were offered bile acid sequestrants. The median rate of response to bile acid sequestrants, among patients with a 7-day SeHCAT retention value of ≤ 15%, was 68% (range 38–86%) (eight studies). The estimated sensitivity of SeHCAT (≤ 15% threshold) to predict positive response to colestyramine was 100% (95% confidence interval 54.1% to 100%) and the specificity estimate was 91.2% (95% confidence interval 76.3% to 98.1%) (one study). The median proportion of treated patients who were intolerant/discontinued bile acid sequestrants was 15% (range 4–27%) (eight studies). There was insufficient information to determine whether or not intolerance varied between colestyramine, colestipol and colesevelam. For both populations, the SeHCAT 15% (i.e. a SeHCAT retention value of ≤ 15%) strategy dominated other strategies or resulted in incremental cost-effectiveness ratios of < £20,000–30,000 per quality-adjusted life-year gained. For the suspected primary bile acid diarrhoea population, SeHCAT 15% was the strategy most likely to be cost-effective: 67% and 73% probability at threshold incremental cost-effectiveness ratios of £20,000 and £30,000 per quality-adjusted life-year gained, respectively. For the Crohn’s disease population, these probabilities were 89% and 92% at £20,000 and £30,000 per quality-adjusted life-year gained, respectively. Cost-effectiveness was mostly led by treatment response. SeHCAT 15% was the strategy with the highest response rate in the majority of scenarios explored. Limitations and conclusions There is a lack of evidence linking the use of SeHCAT testing to patient-relevant outcomes. The optimal SeHCAT threshold, to define bile acid diarrhoea and select patients for treatment with bile acid sequestrants, is uncertain. It is unclear whether or not patients with ‘borderline’ or ‘equivocal’ 7-day SeHCAT retention values (e.g. between 10% and 15%) and patients with values of > 15% could benefit from treatment with bile acid sequestrants. Although the results of the economic evaluation conducted for both populations indicated that the SeHCAT 15% strategy dominated the other two strategies or resulted in incremental cost-effectiveness ratios that were lower than the common thresholds of £20,000 or £30,000 per quality-adjusted life-year gained, the paucity and poor quality of evidence mean that uncertainty is high. Future work The optimum study design would be a multiarm randomised controlled trial, in which participants meeting the inclusion criteria are randomised to receive colestyramine, colestipol, colesevelam or placebo, and all participants receive SeHCAT testing. Study registration This study is registered as PROSPERO CRD42020223877. Funding This project was funded by the National Institute for Health and Care Research (IHR) Evidence Synthesis programme and will be published in full in Health Technology Assessment; Vol. 26, No. 45. See the NIHR Journals Library website for further project information.