OBJECTIVE: To evaluate the likely cost-effectiveness of introducing routine HPV vaccination in Iceland. DESIGN: Prospective cost-effectiveness analysis of human papilloma virus (HPV) vaccination. SETTING AND SAMPLE: Population of 12-year-old girls in the Icelandic population. METHODS: A model was developed, comparing a cohort of all 12-year-old girls alive in year 2006, with or without vaccination. The model was based on the epidemiology of cervical cancer in Iceland and its premalignant stages as well as the costs involved in the treatment of each stage, assuming that the vaccines only prevent infections caused by HPV 16/18 at an efficacy of 95% and participation rate of 90%, no catch-up vaccination, no vaccination of boys and no booster dose needed. All costs were calculated on the basis of the price level of mid-year 2006 with a 3% discount rate. Incremental cost-effectiveness ratio calculations were performed and sensitivity analysis was carried out on factors most relevant for cost-effectiveness. RESULTS: Vaccination costs in excess of savings would be about euro313.000/year. Vaccination would reduce the number of women diagnosed with cervical cancer by almost 9, prevent the death of 1.7 women and result in 16.9 quality-adjusted life years gained annually. The incremental cost-effectiveness ratio was calculated to be about euro18.500/quality-adjusted life year saved. CONCLUSION: HPV vaccination seems to be cost-effective in Iceland, but this was sensitive to various parameters in the model, mainly the discount rate, the price of the vaccines and the need for a booster dose.