The aim of this study was to perform a cost-utility analysis of total hip (THR) and knee replacement (TKR). Arthritis is a disabling condition that leads to long-term deterioration in quality of life. Total joint replacement, despite being one of the greatest advances in medicine of the modern era, has recently come under scrutiny. The National Health Service (NHS) has competing demands, and resource allocation is challenging in times of economic restraint. Patients who underwent THR (n = 348) or TKR (n = 323) between January and July 2010 in one Scottish region were entered into a prospective arthroplasty database. A health-utility score was derived from the EuroQol (EQ-5D) score pre-operatively and at one year, and was combined with individual life expectancy to derive the quality-adjusted life years (QALYs) gained. Two-way analysis of variance was used to compare QALYs gained between procedures, while controlling for baseline differences. The number of QALYs gained was higher after THR than after TKR (6.5 vs 4.0 years, p < 0.001). The cost per QALY for THR was £1372 compared with £2101 for TKR. The predictors of an increase in QALYs gained were poorer health before surgery (p < 0.001) and younger age (p < 0.001). General health (EQ-5D VAS) showed greater improvement after THR than after TKR (p < 0.001). This study provides up-to-date cost-effectiveness data for total joint replacement. THR and TKR are extremely effective both clinically and in terms of cost effectiveness, with costs that compare favourably to those of other medical interventions.