Current evidence suggests that sexually transmitted infection (STI) interventions can be an effective means of human immunodeficiency virus (HIV) prevention in populations at an early stage of the epidemic. However, evidence as to their cost-effectiveness when targeted at high-risk groups is lacking. This paper assesses the cost-effectiveness of a competitive voucher scheme in Managua, Nicaragua aimed at high-risk groups, who could redeem the vouchers in exchange for free STI testing and treatment, health education and condoms, compared with the status quo (no scheme). A provider perspective was adopted, defined as: the voucher agency and health care providers from the public, NGO and private sectors. The cost of the voucher scheme was estimated for a 1-year period (1999) from project accounts using the ingredients approach. Outcomes were monitored as part of ongoing project evaluation. Costs and outcomes in the absence of the scheme were modelled using project baseline data and reports, and relevant literature. The annual cost of providing comprehensive STI services through vouchers was US$62 495, compared with an estimated US$17 112 for regular service provision in the absence of the scheme. 4815 vouchers were distributed by the voucher scheme, 1543 patients were tested for STIs and 528 STIs were effectively cured in this period. In the absence of the scheme, only an estimated 85 cases would have been cured from 1396 consultations. The average cost of the voucher scheme per patient treated was US$41 and US$118 per STI effectively cured, compared with US$12 per patient treated and US$200 per STI cured in its absence. The incremental cost of curing an STI through the voucher scheme, compared with the status quo, was US$103. A voucher scheme offers an effective and efficient means of targeting and effectively curing STIs in high-risk groups, as well as encouraging quality care practices.