The 7-valent pneumococcal conjugate vaccine (PCV-7) has proved to be highly effective against invasive pneumococcal disease and has also provided some protection against all-cause pneumonia and acute otitis media. The objective of this study was to evaluate the projected health benefits, costs and cost-effectiveness of vaccination with the 7-valent conjugated pneumococcal vaccine compared with no vaccination, in all infants in Sweden, taking herd immunity into account. A Markov model was used and a hypothetical birth cohort was simulated for a lifelong perspective. The results show that vaccination of 1 cohort could potentially prevent 9 cases of pneumococcal meningitis, 22 cases of pneumococcal septicaemia, 509 cases of hospitalized pneumonia, 7812 cases of acute otitis media, and 2.7 fatalities, among children 0-4 y of age and 6 episodes of pneumococcal meningitis and 167 cases of pneumococcal septicaemia among adults. The incremental cost per QALY and LY gained was estimated to Euro 29,200 and Euro 51,400, respectively. When herd immunity was accounted for, the cost per QALYand LY gained was estimated to Euro 5500 and Euro 6600, respectively. Thus, the health benefits of a national vaccination programmeme can be achieved within a 'moderate' or 'low' cost per QALY gained.