Background and objective: Malignant pleural effusion is associated with morbidity and mortality. A randomized controlled trial previously compared clinical outcomes and resource use with indwelling pleural catheter (IPC) and talc pleurodesis in this population. Using unpublished quality of life data, we estimate the cost-effectiveness of IPC compared with talc pleurodesis. Methods: Healthcare utilization and costs were captured during the trial. Utility weights produced by the EuroQol Group five-dimensional three-level questionnaire and survival were used to determine quality-adjusted life-years (QALYs) gained. The incremental cost-effectiveness ratio (ICER) was calculated over the 1-year trial period. Sensitivity analysis used patient survival data and modelled additional nursing time required per week for catheter drainage. Results: Utility scores, cost and QALYs gained did not differ significantly between groups. The ICER for IPC compared with talc was favorable at $US10 870 per QALY gained. IPC was less costly with a probability exceeding 95% of being cost-effective when survival was <14 weeks, and was more costly when 2-h nursing time per week was assumed for catheter drainage. Conclusion: IPC is cost-effective when compared with talc, although substantial uncertainty exists around this estimate. IPC appears most cost-effective in patients with limited survival. If significant nursing time is required for catheter drainage, IPC becomes less likely to be cost-effective. Either therapy may be considered as a first-line option in treating malignant pleural effusion in patients without history of prior pleurodesis, with consideration for patient survival, support and preferences.