Journal Article; Research Support, Non-U.S. Gov't ; BACKGROUND: Even when tuberculosis (TB) treatment is free, hidden costs incurred by patients and their households (TB-affected households) may worsen poverty and health. Extreme TB-associated costs have been termed "catastrophic" but are poorly defined. We studied TB-affected households' hidden costs and their association with adverse TB outcome to create a clinically relevant definition of catastrophic costs. METHODS AND FINDINGS: From 26 October 2002 to 30 November 2009, TB patients (n???=???876, 11% with multi-drug-resistant [MDR] TB) and healthy controls (n???=???487) were recruited to a prospective cohort study in shantytowns in Lima, Peru. Patients were interviewed prior to and every 2-4 wk throughout treatment, recording direct (household expenses) and indirect (lost income) TB-related costs. Costs were expressed as a proportion of the household's annual income. In poorer households, costs were lower but constituted a higher proportion of the household's annual income: 27% (95% CI???=???20%-43%) in the least-poor houses versus 48% (95% CI???=???36%-50%) in the poorest. Adverse TB outcome was defined as death, treatment abandonment or treatment failure during therapy, or recurrence within 2 y. 23% (166/725) of patients with a defined treatment outcome had an adverse outcome. Total costs ???20% of household annual income was defined as catastrophic because this threshold was most strongly associated with adverse TB outcome. Catastrophic costs were incurred by 345 households (39%). Having MDR TB was associated with a higher likelihood of incurring catastrophic costs (54% [95% CI???=???43%-61%] versus 38% [95% CI???=???34%-41%], p