OBJECTIVE: To estimate survival, the number of life-years gained and cost effectiveness of antiretroviral therapy (ART) regimens, denoted as ERA-I [zidovudine + (didanosine or zalcitabine)]; ERA-II [stavudine + (didanosine or zalcitabine) or lamivudine + (zidovudine or didanosine or zalcitabine or stavudine)]; and ERA-III [2 nucleoside reverse transcriptase inhibitors + (1 protease inhibitor or 1 non-nucleoside reverse transcriptase inhibitor)]. DESIGN: Modelling of drug cost, cost of opportunistic diseases and survival of HIV positive men and women in the province of British Columbia who were first prescribed any ART between October 1992 and June 1996. A 'reference cohort' was modelled upon individuals in a longitudinal cohort of homosexual men followed since 1982. PERSPECTIVE AND SETTING: Third-party payer perspective in British Columbia, Canada. PATIENTS: All HIV-positive men and women aged > or =18 years with CD4+ counts < or =350 cells/microL who were enrolled in the province-wide drug treatment programme. MAIN OUTCOME MEASURES: Annual costs, survival and cost-effectiveness ratios of successive ART regimens. RESULTS: Total costs [1997 Canadian dollars ($Can)] at 12 months under ERA-I, -II and -III were $Can4897, $Can6620 and $Can 11 914, respectively. Survival at 12 months under ERA-I, -II and -III was 89.6%, 91.0% and 97.6%, respectively. The annual incremental cost (estimated by the total incremental cost at 12 months) between ERA-II and ERA-I was $Can1723. The incremental cost-effectiveness ratios between ERA-III and ERA-I, and between ERA-III and ERA-II were $Can58 806 and $Can46 971 per life-year gained, respectively. CONCLUSION: We found the cost effectiveness of ERA-III ART regimens well within the range of currently funded therapies for the treatment of other chronic diseases.