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Aims: To assess the cost-effectiveness of a two-layer compression bandage versus a standard wool and crepe bandage following total knee arthroplasty, using patient-level data from the Knee Replacement Bandage Study (KReBS). Methods: A cost-utility analysis was undertaken alongside KReBS, a pragmatic, two-arm, open label, parallel-group, randomized controlled trial, in terms of the cost per quality-adjusted life year (QALY). Overall, 2,330 participants scheduled for total knee arthroplasty (TKA) were randomized to either a two-layer compression bandage or a standard wool and crepe bandage. Costs were estimated over a 12-month period from the UK NHS perspective, and health outcomes were reported as QALYs based on participants’ EuroQol five-dimesion five-level questionnaire responses. Multiple imputation was used to deal with missing data and sensitivity analyses included a complete case analysis and testing of costing assumptions, with a secondary analysis exploring the inclusion of productivity losses. Results: The base case analysis found participants in the compression bandage group accrued marginally fewer QALYs, on average, compared with those in the standard bandage group (reduction of 0.0050 QALYs (95% confidence interval (CI) -0.0051 to -0.0049)), and accumulated additional mean costs (incremental cost of £52.68 per participant (95% CI 50.56 to 54.80)). Findings remained robust to assumptions tested in sensitivity analyses, although considerable uncertainty surrounded the outcome estimates. Conclusion: Use of a two-layer compression bandage is marginally less effective in terms of health-related quality of life, and more expensive when compared with a standard bandage following TKA, so therefore is unlikely to provide a cost-effective option. Cite this article: Bone Jt Open 2024;5(7):550–559.