Objective: Approximately between 1.5 and 3.0 per 1000 people are affected by venous leg ulcers (VLUs). The treatment and management of VLUs is costly and recurrence is a major concern. There is evidence that compression stockings can reduce the rate of re-ulceration compared with no compression. We present the first cost-effective analysis of compression stockings in preventing recurrence of VLUs from the perspective of the Ontario healthcare system. Method: A cost-utility analysis with a five-year time horizon was conducted. Use of compression stockings was compared with usual care (no compression stockings). We simulated a hypothetical cohort of 65-year-old patients with healed VLUs, using a state-transition model. Model input parameters were obtained mainly from the published literature. We estimated quality-adjusted life years (QALYs) gained and direct medical costs. We conducted various sensitivity analyses. Results: Compared with usual care, compression stockings were associated with higher costs and increased QALYs. Cost-utility analysis showed that the incremental cost-effectiveness ratio of compression stockings was $23,864 per QALY gained compared with no compression stockings. The most influential drivers of cost-effectiveness were the utility value of healed VLUs, cost of stockings, number of stocking replacements, monthly prevention cost and the risk of VLU recurrence. Conclusion: Compared with usual care, compression stockings were cost-effective in preventing VLUs, using a willingness-to-pay threshold of $50,000. These observations were consistent even when uncertainty in model inputs and parameters were considered.