OBJECTIVE. The objective of our study was to evaluate the cost-effectiveness of active surveillance (AS) versus nephron-sparing surgery (NSS) in patients with a Bosniak IIF or III renal cyst. MATERIALS AND METHODS. Markov models were developed to estimate life expectancy and lifetime costs for 60-year-old patients with a Bosniak IIF or III renal cyst (the reference cases) managed by AS versus NSS. The models incorporated the malignancy rates, reclassification rates during follow-up, treatment effectiveness, complications and costs, and short- and long-term outcomes. An incremental cost-effectiveness analysis was performed to identify management preference under an assumed $75,000 per quality-adjusted life-year (QALY) societal willingness-to-pay threshold, using data from studies in the literature and the 2015 Medicare Physician Fee Schedule. The effects of key parameters were addressed in a multiway sensitivity analysis. RESULTS. The prevalence of malignancy for Bosniak IIF and III renal cysts was 26% (25/96) and 52% (542/1046). Under base case assumptions for Bosniak IIF cysts, the incremental cost-effectiveness ratio of NSS relative to AS was $731,309 per QALY for women, exceeding the assumed societal willingness-to-pay threshold, and AS outperformed NSS for both life expectancy and cost for men. For Bosniak III cysts, AS yielded greater life expectancy (24.8 and 19.4 more days) and lower lifetime costs (cost difference of $12,128 and $11,901) than NSS for men and women, indicating dominance of AS over NSS. Superiority of AS held true in sensitivity analyses for men 46 years old or older and women 57 years old or older even when all parameters were set to favor NSS. CONCLUSION. AS is more cost-effective than NSS for patients with a Bosniak IIF or III renal cyst.