This study evaluated costs associated with risperidone and olanzapine treatment for schizophrenia. Data were collected from the Department of Veterans Affairs computerized database nine months before and nine months after patients began continuous treatment with risperidone (N=23) or olanzapine (N=47). Both agents were associated with significant reductions in psychiatric hospitalization costs. Median increases in antipsychotic costs were significantly higher for patients treated with olanzapine ($1,892) than for those treated with risperidone ($733). Mean dosages were 3.5 mg per day for the risperidone group and 18 mg per day for the olanzapine group. Although both treatments were associated with similar reductions in costs of psychiatric inpatient and outpatient care, it was significantly less expensive to prescribe risperidone than olanzapine.