BACKGROUND: India and many other high-burden countries have committed to providing universal access to high-quality diagnosis and drug susceptibility testing (DST) for tuberculosis (TB), but the most cost-effective approach to achieve this goal remains uncertain. Centralized testing at district-level hub facilities with a supporting sample transport network can generate economies of scale, but decentralization to the peripheral level may provide faster diagnosis and reduce losses to follow-up (LTFU). METHODS: We generated functions to evaluate the costs of centralized and decentralized molecular testing for tuberculosis with Xpert MTB/RIF (Xpert), a WHO-endorsed test which can be performed at centralized and decentralized levels. We merged the cost estimates with an agent-based simulation of TB transmission in a hypothetical representative region in India to assess the impact and cost-effectiveness of each strategy. RESULTS: Compared against centralized Xpert testing, decentralization was most favorable when testing volume at decentralized facilities and pre-treatment LTFU were high, and specimen transport network was exclusively established for TB. Assuming equal quality of centralized and decentralized testing, decentralization was cost-saving, saving a median $338,000 (interquartile simulation range [IQR] - $222,000; $889,000) per 20 million people over 10 years, in the most cost-favorable scenario. In the most cost-unfavorable scenario, decentralized testing would cost a median $3161 [IQR $2412; $4731] per disability-adjusted life year averted relative to centralized testing. CONCLUSIONS: Decentralization of Xpert testing is likely to be cost-saving or cost-effective in most settings to which these simulation results might generalize. More decentralized testing is more cost-effective in settings with moderate-to-high peripheral testing volumes, high existing clinical LTFU, inability to share specimen transport costs with other disease entities, and ability to ensure high-quality peripheral Xpert testing. Decision-makers should assess these factors when deciding whether to decentralize molecular testing for tuberculosis.