In Australian prisons approximately 20% of inmates are chronically infected with hepatitis C virus (HCV), providing an important population for targeted treatment and prevention. A dynamic mathematical model of HCV transmission was used to assess the impact of increasing direct-acting antiviral (DAA) treatment uptake on HCV incidence and prevalence in the prisons in New South Wales, Australia, and to assess the cost-effectiveness of alternate treatment strategies. We developed four separate models reflecting different average prison lengths of stay (LOS) of 2, 6, 24, and 36 months. Each model considered four DAA treatment coverage scenarios of 10% (status-quo), 25%, 50%, and 90% over 2016-2045. For each model and scenario, we estimated the lifetime burden of disease, costs and changes in quality-adjusted life years (QALYs) in prison and in the community during 2016-2075. Costs and QALYs were discounted 3.5% annually and adjusted to 2015 Australian dollars. Compared to treating 10% of infected prisoners, increasing DAA coverage to 25%, 50%, and 90% reduced HCV incidence in prisons by 9-33% (2-months LOS), 26-65% (6-months LOS), 37-70% (24-months LOS), and 35-65% (36-months LOS). DAA treatment was highly cost-effective among all LOS models at conservative willingness-to-pay thresholds. DAA therapy became increasingly cost-effective with increasing coverage. Compared to 10% treatment coverage, the incremental cost per QALY ranged from $497-$569 (2-months LOS), -$280-$323 (6-months LOS), -$432-$426 (24-months LOS), and -$245-$477 (36-months LOS). Treating more than 25% of HCV-infected prisoners with DAA therapy is highly cost-effective. This study shows that treating HCV-infected prisoners is highly cost-effective and should be a government priority for the global HCV elimination effort.