Objective: Our purpose was to estimate and compare the cost-effectiveness of the most commonly used diagnostic tests for onychomycosis: potassium hydroxide preparation (KOH), interpreted both by a dermatologist (KOH-CLINIC) and a laboratory technician (KOH-LAB); KOH with dimethyl sulfoxide (KOH-DMSO) and with chlorazol black E (KOH-CBE), interpreted by a dermatologist; culture using dermatophyte test medium, culture with Mycobiotic and Inhibitory Mold Agar (Cx); and histopathologic analysis using periodic acid-Schiff stain (PAS). Methods: This was a repeated-measure, blinded, cross-sectional study conducted at the Minneapolis Veterans Affairs Medical Center. Inclusion criteria included: at least one toenail with 25% or more clinical disease, which was defined as subungual debris with onycholysis and/or onychauxis. Exclusion criteria included other nail dystrophies, use of oral antifungal medication for 2 months or longer within the past year, or topical ciclopirox lacquer within 6 weeks of enrollment. The main outcome measure was the cost-effectiveness (Medicare and non-Medicare costs) of 7 diagnostic tests. Sensitivity (at least 3 positive tests) was the unit of effectiveness. Results: Two hundred four participants were enrolled; their average age was 69.5 years and 95.5% were male. PAS was the most sensitive test (98.8%); it was statistically significantly more sensitive than all other diagnostic tests except KOH-CBE (94.3%). Dermatophye test medium was the least sensitive test (57.3%). KOH-CBE was statistically significantly more cost effective than any other test, with the exception of KOH-CLINIC and KOH-LAB. PAS was the least cost effective. Limitations: Test specificities were not evaluated. Conclusion: KOH-CBE should be the test of choice for practitioners confident in interpreting KOH preparations because of its combination of high sensitivity and cost-effectiveness.