Previous economic evaluations of hormone replacement therapy (HRT) have restricted positive effects to alleviation of postmenopausal symptoms and negative effects to drug side effects. We studied the association between HRT use and postmenopausal women's valuation of both health-related quality of life and potential treatment side effects. Postmenopausal women with either a documented first vertebral fracture within the past 5 years or no history of osteoporotic fractures were recruited from Olmsted County, Minnesota, and from Dartmouth-Hitchcock Medical Center in New Hampshire to participate in a study to assess quality of life and women's attitudes toward osteoporosis prevention. Women's valuations of their current health and potential HRT-related side effects were quantified as quality-adjusted life years (QALYs) assessed by an automated utility assessment instrument (U-Titer) and the time tradeoff technique, by a vertical rating scale, and by estimated quality of well-being (QWB) scores. Health status was measured using the Medical Outcomes Study SF-36. Regression methods were used to assess the impact of current HRT use on health-related quality of life and valuation of side effects. There were 106 women with vertebral fracture and 180 with no history of hip, wrist, or vertebral fractures. Altogether, 116 (40.6%) women were currently taking HRT, 64 (22.2%) had taken HRT in the past, and 106 (37.1%) women had never taken HRT. Current HRT users had higher time tradeoff QALYs than never and past HRT users, with gains ranging from 15.0 to 83.7 days per year for current users relative to the others. Benefits were largest for women with a vertebral fracture and limitations in activities. The secondary QALY measures also showed significantly higher values for current HRT users compared with other women, as did SF-36 subscales for general health, physical function, role-emotional function, and vitality. There was substantial variability in women's perceptions of HRT side effects. Overall, the proportion of women willing to trade time to avoid bleeding was largest, at 95.5%, followed by breast tenderness, weight gain, and endometrial biopsy at 90.4%, 87.4%, and 82.7%, respectively. Current HRT users had higher health-related quality of life than past or never users according to all measures studied. Women's perceptions of potential side effects were highly variable and should be considered by physicians when prescribing an HRT regimen. If, as our results suggest, postmenopausal therapy has positive effects beyond the immediate postmenopausal years, previous economic studies may have underestimated the value of HRT.