The objective of this study was to determine the costs associated with influenza and the cost effectiveness (net costs per life-year gained) of influenza vaccination in The Netherlands. The economic evaluation comprised a cost-of-illness assessment and a cost-effectiveness analysis, both of which were conducted from the healthcare perspective in The Netherlands. The modelling framework for the economic evaluation linked epidemiological aspects of influenza (e.g. incidence, mortality, years of life lost) to vaccination coverage and healthcare resource use. Healthcare resource use was specified for hospitalisations, general practitioner visits and drugs. The intervention assessed in the cost-effectiveness analysis was influenza vaccination. The costs of influenza were estimated to be 31 million euros (EUR) for the influenza season 1995/96 in The Netherlands (EUR1 approximately $US1.1). For the extended programme in 1997/98, i.e. all elderly people, the cost-effectiveness ratio was estimated at EUR1820 per life-year gained. Sub-group analysis demonstrated that the programme had a more favourable cost effectiveness among the chronically ill elderly population (cost saving) than among the rest of the elderly population (EUR6900 per life-year gained). Influenza vaccination has a cost-effectiveness ratio that is better than or comparable to that of other implemented Dutch programmes in the prevention of infectious diseases.