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The International Maternal, Pediatric, and Adolescent Clinical Trials P1060 trial demonstrated superior outcomes for HIV-infected children less than 3 years old initiating antiretroviral therapy (ART) with lopinavir/ritonavir compared to nevirapine, but lopinavir/ritonavir is four-fold costlier.We used the Cost-Effectiveness of Preventing AIDS Complications (CEPAC)-Pediatric model, with published and P1060 data, to project outcomes under three strategies: no ART; first-line nevirapine (with second-line lopinavir/ritonavir); and first-line lopinavir/ritonavir (second-line nevirapine). The base-case examined South African children initiating ART at age 12 months; sensitivity analyses varied all key model parameters. Outcomes included life expectancy, lifetime costs, and incremental cost-effectiveness ratios [ICERs; dollars/year of life saved ($/YLS)]. We considered interventions with ICERs less than 1× per-capita gross domestic product (South Africa: $7500)/YLS as ‘very cost-effective,’ interventions with ICERs below 3× gross domestic product/YLS as ‘cost-effective,’ and interventions leading to longer life expectancy and lower lifetime costs as ‘cost-saving’.Projected life expectancy was 2.8 years with no ART. Both ART regimens markedly improved life expectancy and were very cost-effective, compared to no ART. First-line lopinavir/ritonavir led to longer life expectancy (28.8 years) and lower lifetime costs ($41 350/person, from lower second-line costs) than first-line nevirapine (27.6 years, $44 030). First-line lopinavir/ritonavir remained cost-saving or very cost-effective compared to first-line nevirapine unless: liquid lopinavir/ritonavir led to two-fold higher virologic failure rates or 15-fold greater costs than in the base-case, or second-line ART following first-line lopinavir/ritonavir was very ineffective.On the basis of P1060 data, first-line lopinavir/ritonavir leads to longer life expectancy and is cost-saving or very cost-effective compared to first-line nevirapine. This supports WHO guidelines, but increasing access to pediatric ART is critical regardless of the regimen used.