Objective: To assess the cost-effectiveness of induction of labour (IOL) with outpatient balloon catheter cervical priming versus inpatient prostaglandin (PG) vaginal gel or tape. Design: Economic evaluation alongside a multi-centre, randomized controlled trial. Setting: Eight Australian maternity hospitals. Population: A total of n=448 women with a live singleton pregnancy, cephalic presentation, at or beyond 37+0 weeks gestation, undergoing IOL for low-risk indications between September 2015 and October 2018. Methods: An economic decision tree model was designed from a health services perspective. Sensitivity and subgroup analyses were performed to test the robustness of model outcomes. Main Outcome Measures: We estimated resource use from time of IOL to discharge of mother and infant, collected data on health outcomes (using EQ-5D-3L questionnaire) and reported cost per quality-adjusted life year (QALY) gained, incremental cost-effect ratio (ICER) and net monetary benefit (NMB). Results: Deterministic analysis showed lower mean costs (AUD $7,294 versus AUD $7,585) in the outpatient-balloon (n=205) compared to the inpatient-PG group (n=243), with better health outcomes (0.75 vs 0.74 QALYs gained) and overall higher NMB ($30,054 vs $29,338). In probabilistic analyses outpatient-balloon IOL was cost-effective in 55.3% of all simulations and 59.1% for women with favourable cervix (modified Bishop score >3) and 64.5% for nulliparous women. Conclusions: Outpatient-balloon IOL might be cost-saving compared to inpatient IOL with PG and is most likely to be cost-effective for nulliparous women. Funding: There was no external funding source for this study. Keywords: Decision analysis, labor induced, cost-effectiveness, prostaglandin, balloon ripening, randomised controlled trial