Reduced vancomycin susceptibility (RVS) may lead to poor clinical outcomes in Staphylococcus aureus bacteremia. The objective of this study was to evaluate the clinical and economic impact of RVS in patients with bacteremia due to S. aureus. A cohort study of patients who were hospitalized from December 2007 to May 2009 with S. aureus bacteremia was conducted within a university health system. Multivariable logistic regression and zero-truncated negative binomial regression models were developed to evaluate the association of RVS with 30-day in-hospital mortality, length of stay, and hospital charges. One hundred thirty-four (34.2%) of a total of 392 patients had bacteremia due to S. aureus with RVS as defined by a vancomycin Etest MIC of >1.0 μg/ml. Adjusted risk factors for 30-day in-hospital mortality included the all patient refined-diagnosis related group (APRDRG) risk-of-mortality score (odds ratio [OR], 7.11; 95% confidence interval [CI], 3.04 to 16.6), neutropenia (OR, 13.4; 95% CI, 2.46 to 73.1), white blood cell count (OR, 1.05; 95% CI, 1.01 to 1.09), immunosuppression (OR, 6.31; 95% CI, 1.74 to 22.9), and intensive care unit location (OR, 3.51; 95% CI, 1.65 to 7.49). In multivariable analyses, RVS was significantly associated with increased mortality in patients with S. aureus bacteremia as a result of methicillin-susceptible (OR, 3.90; 95% CI, 1.07 to 14.2) but not methicillin-resistant (OR, 0.53; 95% CI, 0.19 to 1.46) isolates. RVS was associated with greater 30-day in-hospital mortality in patients with bacteremia due to methicillin-susceptible S. aureus but not methicillin-resistant S. aureus. Further research is needed to identify optimal treatment strategies to reduce mortality associated with RVS in S. aureus bacteremia.