BACKGROUND: The 7-valent pneumococcal conjugate vaccine has been introduced in national immunisation programmes of most industrialised countries and recently in two African GAVI eligible countries (Rwanda and The Gambia). However the long term effects of PCV are still unclear, as beneficial direct and herd immunity effects might be countered by serotype replacement. METHOD: A dynamic, age-structured, compartmental model of Streptococcus pneumoniae transmission was developed to predict the potential impact of PCV7 on the incidence of invasive disease accounting for both herd immunity and serotype replacement effects. The model was parameterised using epidemiological data from England and Wales and pre and post-vaccination surveillance data from the US. RESULTS: Model projections showed that serotype replacement plays a crucial role in determining the overall effect of a PCV7 vaccination programme and could reduce, negate or outweigh its beneficial impact. However, using the estimate of the competition parameter derived from the US post-vaccination experience, an infant vaccination programme would prevent 39,000 IPD cases in the 20 years after PCV7 introduction in the UK. Adding a catch-up campaign for under 2 or under 5 year olds would provide a further reduction of 1,200 or 3,300 IPD cases respectively, mostly in the first few years of the programme. CONCLUSIONS: This analysis suggests that a PCV vaccination programme would eradicate vaccine serotypes from circulation. However, the increase in carriage of non-vaccine serotypes, and the consequent increase in invasive disease, could reduce, negate or outweigh the benefit. These results are sensitive to changes in the protective effect of the vaccine, and, most importantly, to the level of competition between vaccine and non-vaccine types. The techniques developed here can be used to assess the introduction of vaccination programmes in developing countries and provide the basis for cost-effectiveness analyses.