Objective: The optimal timing of biologic agent treatment in polyarticular juvenile idiopathic arthritis (JIA) is unknown. This study evaluated the costs and outcomes of first-line treatment with etanercept (ETN), an anti–tumor necrosis factor (anti-TNF) agent, compared with step-wise therapy in JIA. Methods: We compared 2 strategies: methotrexate (MTX) plus ETN as first-line therapy (ETN-first) and MTX monotherapy followed by ETN (ETN-second), using a cohort state-transition model of newly diagnosed JIA patients. The model's time horizon was 5 years, and the perspective was that of the Canadian health care system. The base case patient was 11 years old, weighed 40 kg, and had 5 or more active joints. Direct costs were calculated and discounted at a rate of 3% per year. Outcomes were expressed as quality-adjusted life years (QALYs). Scenario analyses varied multiple parameters simultaneously to model more severely and more mildly affected patients. Results: ETN-first, compared to ETN-second, yielded a discounted incremental cost of $16,893 (95% confidence interval [95% CI] 9,348–25,310), incremental QALY of 0.19 (95% CI 0.08–0.32), and an incremental cost-effectiveness ratio of $88,815 per QALY gained. The results were sensitive to the cost of ETN, the time horizon of the model, and estimates of the efficacy of the first-line therapies. The cost per QALY for treating patients with severe JIA was $33,960. Conclusion: First-line therapy of ETN and MTX is relatively expensive compared to MTX alone, but may be economically attractive for more severely affected patients. More research is needed regarding the efficacy of first-line anti-TNF agents.