BACKGROUND: Genotypic sequencing for drug-resistant strains of HIV can guide the choice of antiretroviral therapy. OBJECTIVE: To assess the cost-effectiveness of genotypic resistance testing for patients acquiring drug resistance through failed treatment (secondary resistance) and those infected with resistant virus (primary resistance). DESIGN: Cost-effectiveness analysis with an HIV simulation model incorporating CD4 cell count and HIV RNA level as predictors of disease progression. DATA SOURCES: Published randomized trials and data from the Multicenter AIDS Cohort Study, the national AIDS Cost and Services Utilization Survey, the Red Book, and an institutional cost-accounting system. TARGET POPULATION: HIV-infected patients in the United States with baseline CD4 counts of 0.250 x 10(9) cells/L. TIME HORIZON: Lifetime. PERSPECTIVE: Societal. INTERVENTIONS: Genotypic resistance testing and clinical judgment, compared with clinical judgment alone, in two contexts: after initial treatment failure (secondary resistance testing) and before initiation of antiretroviral therapy (primary resistance testing). OUTCOME MEASURES: Life expectancy, quality-adjusted life expectancy, and cost-effectiveness in dollars per quality-adjusted life-year (QALY) gained. RESULTS OF BASE-CASE ANALYSIS: Secondary resistance testing increased life expectancy by 3 months, at a cost of $17 900 per QALY gained. The cost-effectiveness of primary resistance testing was $22 300 per QALY gained with a 20% prevalence of primary resistance but increased to $69 000 per QALY gained with 4% prevalence. RESULTS OF SENSITIVITY ANALYSIS: The cost-effectiveness ratio for secondary resistance testing remained under $25 000 per QALY gained, even when effectiveness and cost of testing and antiretroviral therapy, quality-of-life weights, and discount rate were varied. CONCLUSIONS: Genotypic antiretroviral resistance testing following antiretroviral failure is cost-effective. Primary resistance testing also seems to be reasonably cost-effective and will become more so as the prevalence of primary resistance increases.