More than 75,000 rotator cuff repairs are performed annually, yet cost-effectiveness data are unavailable. This study examines the cost utility of rotator cuff repair by relating surgical costs to increase in quality-adjusted life-years (QALYs). Eighty-seven patients were followed up prospectively for 1 year, during which cost and quality of life data were collected. Patient-based utility measures of quality of life (European Quality-of-Life measure [EuroQoL] and Health Utility Index [HUI]) were administered. Changes in these measures generated net QALYs. Finally, life expectancies were applied to generate a cost-effectiveness ratio, and subsequent 1-way sensitivity analyses varied costs, QALYs, and discount rates to determine which factors drive cost-effectiveness. Total costs averaged $10,605.20. Significant improvements were noted in health-related quality of life postoperatively. The estimated mean lifetime gain in QALYs from surgery was 0.81 by use of the HUI and 3.43 by use of the EuroQoL. This yielded cost-effectiveness ratios of $13,092.84/QALY by use of the HUI and $3,091.90/QALY by use of the EuroQoL. The cost-effectiveness of rotator cuff repair compares favorably with other common interventions in health care and reaches commonly accepted benchmarks for cost-effectiveness.