BACKGROUND: Growing evidence suggests that individuals with transfemoral amputation or knee disarticulation using a prosthesis equipped with a microprocessor-controlled knee (MPK) benefit from enhanced mobility and safety, including less falls. In elderly individuals, high mortality rates are assumed to reduce the expected useful life of MPKs, and this raises concerns regarding their economic effectiveness. OBJECTIVE: To investigate the cost-effectiveness and budget impact of the Kenevo/MPK (Ottobock, Germany) compared with non-microprocessor-controlled knees (NMPKs) in people older than 65 years at the time of transfemoral amputation/knee disarticulation, from a Swedish payer's perspective. METHODS: A decision-analytic model was developed to conduct the economic analysis of the Kenevo/MPK. Model parameters were derived from Swedish databases and published literature. Univariate and probabilistic sensitivity analyses were performed to explore parameter uncertainty. RESULTS: Compared with NMPKs, the Kenevo/MPK reduced the frequency of hospitalizations by 137 per 1,000 person years while the frequency of fatal falls was reduced by 19 per 1,000 person-years in the simulation. Over a 25-year time horizon, the incremental cost-effectiveness ratio was EUR11,369 per quality-adjusted life year. The probability of the MPK being cost-effective at a threshold of EUR40,000 per quality-adjusted life year was 99%. The 5-year budget impact model predicted an increase in payer expenditure of EUR1.76 million if all new patients received a Kenevo/MPK, and 50% of current NMPK users switched to the MPK. CONCLUSIONS: Results of the modeling suggest that the Kenevo/MPK is likely to be cost-effective for elderly individuals, primarily because of a reduction in falls.