BACKGROUND: American Academy of Pediatrics guidelines for acute otitis media (AOM) allow for children meeting certain criteria to undergo watchful waiting (WW). The cost-effectiveness of this policy has not been evaluated in the United States. METHODS: A retrospective review of a random selection of 250 patients ≤18 years old with AOM in the emergency department of a tertiary care children’s hospital was used to characterize current practice of AOM management. These data were incorporated into a decision-analytic cost-utility model comparing the cost-effectiveness of implementing WW to current practice. The primary outcome was the incremental cost-effectiveness ratio (ICER) expressed in 2015 USD per disability-adjusted life year (DALY) averted from a societal perspective. Multiple sensitivity analyses were conducted. RESULTS: From this cohort, chart review confirmed 247 actually had AOM on physical examination. Of these, 231 (93.5%) were prescribed antibiotics, 7 (2.8%) underwent WW, and 9 (3.6%) were sent home without an antibiotic prescription. When American Academy of Pediatrics criteria for WW were applied to this population, 104 patients (42.1%) met conditions for immediate antibiotic prescription, and 143 patients (57.9%) qualified for WW. In our modeled scenario, for every 1000 patients with AOM, implementing WW yielded 514 fewer immediate antibiotic prescriptions and 205 fewer antibiotic prescriptions used, averting 14.3 DALYs, and saving $5573. The preferability of WW over current practice proved highly robust to sensitivity analysis. CONCLUSIONS: WW for AOM management is cost-effective. Implementing WW may improve outcomes and reduce health care expenditures.