Our objective was to assess the economic impact of store-and-forward teledermatology in a United States Department of Veterans Affairs (VA) health care setting. Patients being referred to the Dermatology Consult Service from the Primary Care Clinics at the Durham, North Carolina VA Medical Center were randomized either to usual care or to a teledermatology consultation. Fixed and variable costs for both consult modalities were identified using a microcosting approach. The observed clinical outcomes from the randomized trial generated probability and effectiveness measures that were inserted into a decision model. A cost analysis and a cost-effectiveness analysis that compared the two consult modalities was performed. Teledermatology was not cost saving when compared to usual care using observed costs and outcomes. Sensitivity analyses indicated that teledermatology has the potential to be cost saving if clinic visit costs, travel costs, or averted clinic visits were higher than observed in the study. Teledermatology was cost-effective for decreasing the time required for patients to reach a point of initial definitive care. Cost-effectiveness ratios ranged from $0.12-0.17 (U.S.) per patient per day of time to initial intervention.