Background Avahan is a large-scale, HIV preventive intervention, targeting high-risk populations in south India. We assessed the cost-eff ectiveness of Avahan to inform global and national funding institutions who are considering investing in worldwide HIV prevention in concentrated epidemics. Methods We estimated cost eff ectiveness from a programme perspective in 22 districts in four high-prevalence states. We used the UNAIDS Costing Guidelines for HIV Prevention Strategies as the basis for our costing method, and calculated effect estimates using a dynamic transmission model of HIV and sexually transmitted disease transmission that was parameterised and fi tted to locally observed behavioural and prevalence trends. We calculated incremental cost-eff ective ratios (ICERs), comparing the incremental cost of Avahan per disability-adjusted life-year (DALY) averted versus a no-Avahan counterfactual scenario. We also estimated incremental cost per HIV infection averted and incremental cost per person reached. Findings Avahan reached roughly 150000 high-risk individuals between 2004 and 2008 in the 22 districts studied, at a mean cost per person reached of US$327 during the 4 years. This reach resulted in an estimated 61000 HIV infections averted, with roughly 11 000 HIV infections averted in the general population, at a mean incremental cost per HIV infection averted of $785 (SD 166). We estimate that roughly 1 million DALYs were averted across the 22 districts, at a mean incremental cost per DALY averted of $46 (SD 10). Future antiretroviral treatment (ART) cost savings during the lifetime of the cohort exposed to HIV prevention were estimated to be more than $77 million (compared with the slightly more than $50 million spent on Avahan in the 22 districts during the 4 years of the study). Interpretation This study provides evidence that the investment in targeted HIV prevention programmes in south India has been cost eff ective, and is likely to be cost saving if a commitment is made to provide ART to all that can benefit from it. Policy makers should consider funding and sustaining large-scale targeted HIV prevention programmes in India and beyond.