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Objectives: To establish the relative cost effectiveness of community leg ulcer clinics that use four layer compression bandaging versus usual care provided by district nurses. Design: Randomised controlled trial with 1 year of follow up. Setting: Eight community based research clinics in four trusts in Trent. Subjects: 233 patients with venous leg ulcers allocated at random to intervention (120) or control (113) group. Interventions: Weekly treatment with four layer bandaging in a leg ulcer clinic (clinic group) or usual care at home by the district nursing service (control group). Main outcome measures: Time to complete ulcer healing, patient health status, and recurrence of ulcers. Satisfaction with care, use of services, and personal costs were also monitored. Results: The ulcers of patients in the clinic group tended to heal sooner than those in the control group over the whole 12 month follow up (log rank P=0.03). At 12 weeks, 34% of patients in the clinic group were healed compared with 24% in the control. The crude initial healing rate of ulcers in intervention compared with control patients was 1.45 (95% confidence interval 1.04 to 2.03). No significant differences were found between the groups in health status. Mean total NHS costs were £878.06 per year for the clinic group and £859.34 for the control (P=0.89). Conclusions: Community based leg ulcer clinics with trained nurses using four layer bandaging is more effective than traditional home based treatment. This benefit is achieved at a small additional cost and could be delivered at reduced cost if certain service configurations were used.