ABSTRACT: BACKGROUND: Although the negative health consequences of the exposure to second hand tobacco smoke during childhood are already known, evidence on the economic consequences is still rare. The aim of this study was to estimate excess healthcare costs of exposure to tobacco smoke in German children. METHODS: The study is based on data from two birth cohort studies of 3,518 children aged 9-11 years with information on healthcare utilisation and tobacco smoke exposure: the GINIplus study (German Infant Study On The Influence Of Nutrition Intervention Plus Environmental And Genetic Influences On Allergy Development) and the LISAplus study (Influence of Life-Style Factors On The Development Of The Immune System And Allergies In East And West Germany Plus The Influence Of Traffic Emissions And Genetics). Direct medical costs were estimated using a bottom-up approach (base year 2007). We investigated the impact of tobacco smoke exposure in different environments on the main components of direct healthcare costs using descriptive analysis and a multivariate two-step regression analysis. RESULTS: Descriptive analysis showed that average annual medical costs (physician visits, physical therapy and hospital treatment) were considerably higher for children exposed to second-hand tobacco smoke at home (indoors or on patio/balcony) compared with those who were not exposed. Regression analysis confirmed these descriptive trends: the odds of positive costs and the amount of total costs are significantly elevated for children exposed to tobacco smoke at home after adjusting for confounding variables. Combining the two steps of the regression model shows smoking attributable total costs per child exposed at home of [euro sign]87 [10--165] (patio/balcony) and [euro sign]144 [6--305] (indoors) compared to those with no exposure. Children not exposed at home but in other places showed only a small, but not significant, difference in total costs compared to those with no exposure. CONCLUSIONS: This study shows adverse economic consequences of second-hand smoke in children depending on proximity of exposure. Tobacco smoke exposure seems to affect healthcare utilisation in children who are not only exposed to smoke indoors but also if parents reported exclusively smoking on patio or balcony. Preventing children from exposure to second-hand tobacco smoke might thus be desirable not only from a health but also from an economic perspective.