Due to viral strains, influenza season, and consultations and admission rates varying from country to country, the continued economic evaluation of influenza vaccination for the elderly people aged 65 years and above is paramount, particularly in areas with dense population. Efficacy and cost-effective analysis of influenza vaccination in reducing all-cause mortality and hospitalization was therefore elucidated based on a prospective and population-based study targeted to 226,997 elderly people aged 65 years and above residing in Taipei county, Taiwan between 1 October 2000 and 31 March 2001. Vaccination against influenza for the elderly persons can lead to a 29% (95% CI: 23-35%) significant reduction of all-cause deaths. Approximately, 20% (95% CI: 9-30%) significant reduction in hospitalization was observed for average-risk group but 4% (95% CI: -4-11%) non-significant reduction for high-risk group. Community-based influenza vaccination program for elderly people aged 65 years and above was demonstrated to be effective in reducing mortality in all elderly people but not significantly in reducing hospitalization. Universal vaccination program for the elderly people seems cost-effective in averting death or gaining life years.