Abstract: Few studies have compared hospitalizations before and after antiretroviral therapy (ART) initiation in the same patients. We analyzed the cost of hospitalizations among 3906 adult patients in 2 South African hospitals, 30% of whom initiated ART. Hospitalizations were 50% and 40% more frequent and 1.5 and 2.6 times more costly at a CD4 cell count <100 cells/mm3 when compared with 200–350 cells/mm3 in the pre-ART and ART period, respectively. Mean inpatient cost per patient year was USD 117 (95% confidence interval, 85 to 158) for patients on ART and USD 72 (95% confidence interval, 56 to 89) for pre-ART patients. Raising ART eligibility thresholds could avoid the high cost of hospitalization before and immediately after ART initiation.