Background Schizophrenia is often a persistent and costly illness that requires continued treatment with antipsychotics. Differences among antipsychotics on efficacy, safety, tolerability, adherence, and cost have cost-effectiveness implications for treating schizophrenia. This study compares the cost-effectiveness of oral olanzapine, oral risperidone (at generic cost, primary comparator), quetiapine, ziprasidone, and aripiprazole in the treatment of patients with schizophrenia from the perspective of third-party payers in the U.S. health care system. Methods A 1-year microsimulation economic decision model, with quarterly cycles, was developed to simulate the dynamic nature of usual care of schizophrenia patients who switch, continue, discontinue, and restart their medications. The model captures clinical and cost parameters including adherence levels, relapse with and without hospitalization, quality-adjusted life years (QALYs), treatment discontinuation by reason, treatment-emergent adverse events, suicide, health care resource utilization, and direct medical care costs. Published medical literature and a clinical expert panel were used to develop baseline model assumptions. Key model outcomes included mean annual total direct cost per treatment, cost per stable patient, and incremental cost-effectiveness values per QALY gained. Results The results of the microsimulation model indicated that olanzapine had the lowest mean annual direct health care cost ($8,544) followed by generic risperidone ($9,080). In addition, olanzapine resulted in more QALYs than risperidone (0.733 vs. 0.719). The base case and multiple sensitivity analyses found olanzapine to be the dominant choice in terms of incremental cost-effectiveness per QALY gained. Conclusion The utilization of olanzapine is predicted in this model to result in better clinical outcomes and lower total direct health care costs compared to generic risperidone, quetiapine, ziprasidone, and aripiprazole. Olanzapine may, therefore, be a cost-effective therapeutic option for patients with schizophrenia.