In response to health care workers' concerns about contracting infection with the human immunodeficiency virus (HIV) in the workplace, several institutions now offer prophylactic azido-deoxythymidine (AZT) for needlesticks sustained while exposed to HIV-infected patients. The authors designed a model to evaluate the cost-effectiveness of AZT prophylaxis. If AZT were 100% effective, prophylaxis would cost $2,388 per life-year gained and $66,876 per life saved using a societal perspective. For each $100 increase in the cost of AZT, the cost per life-year saved increased $1,190. Reducing the efficacy of AZT to 75, 50, and 25% raised the costs per life-year gained to $3,184, $4,775, and $9,551, respectively. If AZT were given for all needlesticks without regard to the HIV status of the source, the costs of prophylaxis would rise substantially. It is concluded that AZT, if moderately effective, can be cost-effective as a prophylactic agent but only if used in instances where the source is known to have an HIV infection.