SETTING: Initial cost-effectiveness evaluations of Xpert(®) MTB/RIF for tuberculosis (TB) diagnosis have not fully accounted for the realities of implementation in peripheral settings. OBJECTIVE: To evaluate costs and diagnostic outcomes of Xpert testing implemented at various health care levels in Uganda. DESIGN: We collected empirical cost data from five health centers utilizing Xpert for TB diagnosis, using an ingredients approach. We reviewed laboratory and patient records to assess outcomes at these sites and10 sites without Xpert. We also estimated incremental cost-effectiveness of Xpert testing; our primary outcome was the incremental cost of Xpert testing per newly detected TB case. RESULTS: The mean unit cost of an Xpert test was US$21 based on a mean monthly volume of 54 tests per site, although unit cost varied widely (US$16-58) and was primarily determined by testing volume. Total diagnostic costs were 2.4-fold higher in Xpert clinics than in non-Xpert clinics; however, Xpert only increased diagnoses by 12%. The diagnostic costs of Xpert averaged US$119 per newly detected TB case, but were as high as US$885 at the center with the lowest volume of tests. CONCLUSION: Xpert testing can detect TB cases at reasonable cost, but may double diagnostic budgets for relatively small gains, with cost-effectiveness deteriorating with lower testing volumes.