Antiviral therapy for the treatment of hepatitis C virus (HCV) infection is used before and after liver transplantation. The objective of this study was to determine the most cost-effective timing for pegylated interferon/ribavirin therapy in patients with advanced liver disease infected with genotype 1 HCV. A Markov model was constructed to compare treatment strategies: (1) no treatment, (2) antiviral therapy in patients with compensated cirrhosis, (3) antiviral therapy in patients with decompensated cirrhosis, and (4) antiviral therapy in patients with progressive fibrosis due to recurrent HCV post-transplantation. Outcomes of interest included the total cost per patient, number of quality-adjusted life years (QALYs) saved, cost per QALY saved, number of deaths and hepatocellular carcinomas (HCCs), and number of transplants required. Compared to the no-antiviral treatment strategy, treatment during compensated cirrhosis increased QALYs by 0.950 and saved $55,314. Treatment during decompensated cirrhosis increased QALYs by 0.044 and saved $5511. Treatment during posttransplant advanced recurrence increased QALYs by 0.061 and saved $3223. Treatment of patients with compensated cirrhosis resulted in 119 fewer deaths, 54 fewer HCCs, and 66 fewer transplants with respect to the no-treatment strategy. The model was sensitive to the rate of graft failure in patients with and without sustained virological response. The model was otherwise robust to all variables tested in sensitivity analysis. In conclusion, the treatment of patients with compensated cirrhosis was found to be the most cost-effective strategy and resulted in improved survival and decreased cost in comparison with all other strategies. This study provides pharmacoeconomic evidence in support of treating HCV in patients with compensated cirrhosis before progression to more advanced liver disease.