**Background:** Positron emission tomography (PET) with 18-fluorodeoxyglucose (FDG) is a potentially useful but expensive test to diagnose solitary pulmonary nodules.

**Objective:** To evaluate the cost-effectiveness of strategies for pulmonary nodule diagnosis and to specifically compare strategies that did and did not include FDG-PET.

**Design:** Decision model.

**Data Sources:** Accuracy and complications of diagnostic tests were estimated by using meta-analysis and literature review. Modeled survival was based on data from a large tumor registry. Cost estimates were derived from Medicare reimbursement and other sources.

**Target Population:** All adult patients with a new, noncalcified pulmonary nodule seen on chest radiograph.

**Time Horizon:** Patient lifetime.

**Perspective:** Societal.

**Intervention:** 40 clinically plausible combinations of 5 diagnostic interventions, including computed tomography, FDG-PET, transthoracic needle biopsy, surgery, and watchful waiting.

**Outcome Measures:** Costs, quality-adjusted life-years (QALYs), and incremental cost-effectiveness ratios.

**Results of Base-Case Analysis:** The cost-effectiveness of strategies depended critically on the pretest probability of malignancy. For patients with low pretest probability (26%), strategies that used FDG-PET selectively when computed tomography results were possibly malignant cost as little as $20 000 per QALY gained. For patients with high pretest probability (79%), strategies that used FDG-PET selectively when computed tomography results were benign cost as little as $16 000 per QALY gained. For patients with intermediate pretest probability (55%), FDG-PET strategies cost more than $220 000 per QALY gained because they were more costly but only marginally more effective than computed tomography-based strategies.

**Results of Sensitivity Analysis:** The choice of strategy also depended on the risk for surgical complications, the probability of nondiagnostic needle biopsy, the sensitivity of computed tomography, and patient preferences for time spent in watchful waiting. In probabilistic sensitivity analysis, FDG-PET strategies were cost saving or cost less than $100 000 per QALY gained in 76.7%, 24.4%, and 99.9% of computer simulations for patients with low, intermediate, and high pretest probability, respectively.

**Conclusions:** FDG-PET should be used selectively when pretest probability and computed tomography findings are discordant or in patients with intermediate pretest probability who are at high risk for surgical complications. In most other circumstances, computed tomography-based strategies result in similar quality-adjusted life-years and lower costs.