BACKGROUND: As a result of rising levels of drug resistance to conventional monotherapy, the World Health Organization (WHO) and other international organisations have recommended that malaria endemic countries move to combination therapy, ideally with artemisinin-based combinations (ACTs). Cost is a major barrier to deployment. There is little evidence from field trials on the cost-effectiveness of these new combinations. METHODS AND FINDINGS: An economic evaluation of drug combinations was designed around a randomised effectiveness trial of combinations recommended by the WHO, used to treat Tanzanian children with non-severe slide-proven malaria. Drug combinations were: amodiaquine (AQ), AQ with sulfadoxine-pyrimethamine (AQ+SP), AQ with artesunate (AQ+AS), and artemether-lumefantrine (AL) in a six-dose regimen. Effectiveness was measured in terms of resource savings and cases of malaria averted (based on parasitological failure rates at days 14 and 28). All costs to providers and to patients and their families were estimated and uncertain variables were subjected to univariate sensitivity analysis. Incremental analysis comparing each combination to monotherapy (AQ) revealed that from a societal perspective AL was most cost-effective at day 14. At day 28 the difference between AL and AQ+AS was negligible; both resulted in a gross savings of approximately US1.70 dollars or a net saving of US22.40 dollars per case averted. Varying the accuracy of diagnosis and the subsistence wage rate used to value unpaid work had a significant effect on the number of cases averted and on programme costs, respectively, but this did not change the finding that AL and AQ+AS dominate monotherapy. CONCLUSIONS: In an area of high drug resistance, there is evidence that AL and AQ+AS are the most cost-effective drugs despite being the most expensive, because they are significantly more effective than other options and therefore reduce the need for further treatment. This is not necessarily the case in parts of Africa where recrudescence following SP and AQ treatment (and their combination) is lower so that the relative advantage of ACTs is smaller, or where diagnostic services are not accurate and as a result much of the drug goes to those who do not have malaria.