BACKGROUND: Ahmedabad is an industrial city in Gujarat, India. In 2003, the HIV prevalence among commercial sex workers (CSWs) in Ahmedabad reached 13.0%. In response, the Jyoti Sangh HIV prevention programme for CSWs was initiated, which involves outreach, peer education, condom distribution, and free STD clinics. Two surveys were performed among CSWs in 1999 and 2003. This study estimates the cost-effectiveness of the Jyoti Sangh HIV prevention programme. METHODS: A dynamic mathematical model was used with survey and intervention-specific data from Ahmedabad to estimate the HIV impact of the Jyoti Sangh project for the 51 months between the two CSW surveys. Uncertainty analysis was used to obtain different model fits to the HIV/STI epidemiological data, producing a range for the HIV impact of the project. Financial and economic costs of the intervention were estimated from the provider's perspective for the same time period. The cost per HIV-infection averted was estimated. RESULTS: Over 51 months, projections suggest that the intervention averted 624 and 5,131 HIV cases among the CSWs and their clients, respectively. This equates to a 54% and 51% decrease in the HIV infections that would have occurred among the CSWs and clients without the intervention. In the absence of intervention, the model predicts that the HIV prevalence amongst the CSWs in 2003 would have been 26%, almost twice that with the intervention. Cost per HIV infection averted, excluding and including peer educator economic costs, was USD 59 and USD 98 respectively. CONCLUSION: This study demonstrated that targeted CSW interventions in India can be cost-effective, and highlights the importance of replicating this effort in other similar settings.