Background: Paliperidone Extended Release OROS (ER) is a new atypical antipsychotic for the treatment of schizophrenia. The objective is, based on a previously published model, to analyze the clinical and economic effects of Paliperidone ER in a Spanish setting compared to olanzapine oral and aripiprazole. Methods: An existing discrete event simulation model was adapted to reflect the treatment of schizophrenia in Spain in terms of costs, resource use, and treatment patterns. Inputs for the model were derived from clinical trial data, literature research, database analysis and interviews with local clinical experts. The time horizon is 5 years and Spanish discount rate was applied. Outputs include direct medical costs and Quality Adjusted Life-Years (QALYs). Extensive sensitivity analyses were carried out to assess the robustness of the results, using ordinary least squares analysis and cost-effectiveness scatter plots. Results: The results show that the mean incremental QALYs (95% CI) compared to olanzpine is 0.033 [-0.143, 0.304] and compared to aripiprazole 0.029 [-0.107, 0.300]. The corresponding mean incremental costs and corresponding confidence intervals are 1425 [10,247,3084] and 759 [10,479,3404], respectively. The probability that paliperidone ER is cost-saving and health gaining compared to olanzapine and aripiprazole is 76% and 72%, respectively. Paliperidone ER was estimated to have 80% and 81% probability of being cost-effective compared to olanzapine at a willingness to pay of 20,000 and 30,000 and 73% and 74% compared to aripiprazole, respectively. Limitations: Some of the modeled inter-relationships had to be based on expert opinion due to a lack of information. Also, foreign sources for the disutility of adverse events had been used due to a lack of Spanish data. Prolactin-related side-effects, indirect costs, and potential compliance advantages of paliperidone ER were not considered. It is unlikely that these limitations affected the conclusions. Conclusion: Based on differences in drug acquisition costs, side-effects, and risk of relapse, the model predicts that, in the Spanish healthcare setting, paliperidone ER dominates oral olanzapine and aripiprazole, with a probability of 76% and 72%, respectively.