A retrospective costing study of 212 patients enrolled in a nongovernmental organization-supported public sector antiretroviral treatment (ART) program near Cape Town, South Africa was performed from a health care system perspective. gamma-Regression was used to analyze total costs in 3 periods: Pre-ART (median length=30 days), first 48 weeks on ART (Year One), and 49 to 112 weeks on ART (Year Two). Average cost per patient Pre-ART was $404. Average cost per patient-year of observation was $2502 in Year One and $1372 in Year Two. The proportion of costs attributable to hospital care fell from 70% Pre-ART to 24% by Year Two; the proportion attributable to ART rose from 31% in Year One to 55% in Year Two. In multivariate analysis, Pre-ART and Year One costs were significantly lower for asymptomatic patients compared with those with AIDS. Costs were significantly higher for those who died Pre-ART or in Year One. In Year Two, only week 48 CD4 cell count and being male were significantly associated with lower costs. This analysis suggests that the total cost of treatment for patients on ART falls by almost half after 1 year, largely attributable to a reduction in hospital costs.