Background. Induction therapy in deceased donor kidney transplantation is costly, with wide discrepancy in utilization and a limited evidence base, particularly regarding cost-effectiveness. Methods. We linked the United States Renal Data System data set to Medicare claims to estimate cumulative costs, graft survival, and incremental cost-effectiveness ratio (ICER - cost per additional year of graft survival) within 3 years of transplantation in 19 450 deceased donor kidney transplantation recipients with Medicare as primary payer from 2000 to 2008. We divided the study cohort into high-risk (age > 60 years, panelreactive antibody > 20%, African American race, Kidney Donor Profile Index > 50%, cold ischemia time > 24 hours) and lowrisk (not having any risk factors, comprising approximately 15% of the cohort). After the elimination of dominated options, we estimated expected ICER among induction categories: no-induction, alemtuzumab, rabbit antithymocyte globulin (r-ATG), and interleukin-2 receptor-antagonist. Results. No-induction was the least effective and most costly option in both risk groups. Depletional antibodies (r-ATG and alemtuzumab) were more cost-effective across all willingness-to-pay thresholds in the low-risk group. For the high-risk group and its subcategories, the ICER was very sensitive to the graft survival; overall both depletional antibodies were more cost-effective, mainly for higher willingness to pay threshold (US $100 000 and US $150 000). Rabbit ATG appears to achieve excellent cost-effectiveness acceptability curves (80% of the recipients) in both risk groups at US $50 000 threshold (except age > 60 years). In addition, only r-ATG was associated with graft survival benefit over no-induction category (hazard ratio, 0.91; 95% confidence interval, 0.84-0.99) in a multivariable Cox regression analysis. Conclusions. Antibody-based induction appears to offer substantial advantages in both cost and outcome compared with no-induction. Overall, depletional induction (preferably r-ATG) appears to offer the greatest benefits.