AIM: To undertake a cost-effectiveness analysis of a harm reduction and HIV prevention project for injecting drug users (IDUs) in Eastern Europe. Economic evaluation methods were adapted to consider the effect of an 8-month financing gap that negatively impacted on project implementation. DESIGN: Financial and economic costs of implementing the intervention were analysed retrospectively. The data were also modelled to estimate the costs of a fully functioning project. Estimates of the intervention impact on sexual and drug injecting behaviour were obtained from existing pre- and post-intervention behavioural surveys of IDUs. A dynamic mathematical model was used to translate these changes into estimates of HIV infections averted among IDUs and their sexual partners. Projections of the potential effect of the shortfall in funding on the impact and cost-effectiveness of the intervention were made. SETTING: Svetlogorsk, Belarus, where in 1997 the IDU HIV prevalence was 74%. FINDINGS: The intervention averted 176 HIV infections (95% CI 60-270) with a cost-effectiveness of 359 dollars per HIV infection averted (95% CI 234-1054 dollars). Without the 2311 dollars reduction (7%) in financing, the estimated cost-effectiveness ratio of the project would have been 11% lower. The costing methods used to measure donated mass media can substantially influence cost and cost-effectiveness estimates. CONCLUSIONS: Harm reduction activities among IDUs can be cost-effective, even when IDU HIV prevalence and incidence is high. Relatively small shortfalls in funding reduce impact and cost-effectiveness. Increased and consistent allocation of resources to harm reduction projects could significantly reduce the pace of the HIV epidemic in Eastern Europe.