BACKGROUND AND OBJECTIVE: Medical groups have invested billions of dollars in electronic medical records (EMRs), but few studies have examined the cost-effectiveness of EMR-based clinical decision support (CDS). This study examined the cost-effectiveness of EMR-based CDS for adults with diabetes from the perspective of the health care system. DATA SOURCES/SETTING: Clinical outcome and cost data from a randomized clinical trial of EMR-based CDS were used as inputs into a diabetes simulation model. The simulation cohort included 1,092 patients with diabetes with A1c above goal at baseline. STUDY DESIGN: The United Kingdom Prospective Diabetes Study Outcomes Model, a validated simulation model of diabetes, was used to evaluate remaining life years, quality-adjusted life years (QALYs), and health care costs over patient lifetimes (40-year time horizon) from the health system perspective. PRINCIPAL FINDINGS: Patients in the intervention group had significantly lowered A1c (0.26 percent, p = .014) relative to patients in the control arm. Intervention costs were $120 (SE = 45) per patient in the first year and $76 (SE = 45) per patient in the following years. In the base case analysis, EMR-based CDS increased lifetime QALYs by 0.04 (SE = 0.01) and increased lifetime costs by $112 (SE = 660), resulting in an incremental cost-effectiveness ratio of $3,017 per QALY. The cost-effectiveness of EMR-based CDS persisted in one-way, two-way, and probabilistic sensitivity analyses. CONCLUSIONS: Widespread adoption of sophisticated EMR-based CDS has the potential to modestly improve the quality of care for patients with chronic conditions without substantially increasing costs to the health care system.