OBJECTIVE: To evaluate the effectiveness and cost effectiveness of methylphenidate in the treatment of children with hyperkinetic disorder as defined using ICD-10 criteria. DESIGN: Comprehensive literature review and cost utility analysis comparing methylphenidate treatment with placebo. Costs and effects were estimated from a NHS perspective according to the methodology developed by the previous South and West Development and Evaluation Committee. The number of Quality Adjusted Life Years (QALYs) gained was estimated by using the Index of Health Related Quality of Life to model treatment effects. RESULTS: Evidence from good and medium quality randomized controlled trials shows benefits of methylphenidate over weeks and months respectively. Evidence beyond 6 months is poorer and it is uncertain whether effects of methylphenidate persist into adolescence and adulthood. Methylphenidate is of reasonable cost-effectiveness when considering short- and medium- term benefits with an estimated cost per QALY of 7 pounds 400 to 9 pounds 200 at 1997 prices. CONCLUSIONS: Short-term treatment of hyperkinetic children with methylphenidate is effective and cost effective.