Background and Aims: Omeprazole has shown remarkable efficacy and safety in the treatment of patients with gastroesophageal reflux disease (GERD); similarly, laparoscopic techniques have allowed less morbidity in patients undergoing fundoplication procedures. Concerns about the long-term cost and safety of both strategies have prompted a debate of their role in long-term management of patients with severe erosive esophagitis. Methods: A cost- utility analysis was performed to compare two strategies: laparoscopic Nissen fundoplication (LNF) vs. omeprazole. A two-stage Markov model was used to obtain cost and efficacy estimates; all estimates were discounted at 3% per year. The time horizon was 5 years. Sensitivity analyses were performed on all relevant variables. Results: Both strategies were similarly effective (4.33 quality-adjusted life years per patient), with omeprazole less expensive than LNF ($6053 vs. $9482 per patient). At 10 years, LNF and omeprazole costs were similar. Efficacy estimates were extremely sensitive to changes in quality of life associated with postoperative symptoms and long- term use of medication. Conclusions: Medical therapy is the preferred treatment strategy for most patients with severe erosive esophagitis. Individuals with a long life expectancy are good candidates for LNF if postoperative morbidity is low and GERD symptoms remain abated for many years.