Objective: This study is to evaluate the cost-effectiveness of oral paliperidone extended-release (ER) compared to two other commonly prescribed oral second-generation antipsychotics (SGAs), olanzapine and quetiapine, in treating patients with schizophrenia in Taiwan. Methods: We developed two decision analytic models (an acute and a long-term treatment model) to predict six-week and one-year health outcomes as well as total medical expenditure. In those models, we considered medication discontinuation rates, response rates, and relapse rates as well as resource use (frequency and unit costs) of regular follow-up, relapse, and adverse effect management. We did a systematic literature review, analysis of the National Health Insurance Research Database, and collection of experts' opinions to obtain the best estimates for model parameters. Health outcome measures were the number of responding patients at six weeks and the number of stable days per patient during a one-year period. We estimated total direct medical costs, and did sensitivity analyses. Results: Among quetiapine, paliperidone ER, and olanzapine, quetiapine was found in this study to have the highest cost and lowest effectiveness. A higher percentage of patients receiving paliperidone ER was found to respond at the end of the six-week period, with a incremental cost-effectiveness ratio (ICER) of NT$10,700 (per patient who responded) compared with olanzapine (US$1=NT$30.5). After a one-year treatment period, paliperidone ER was found to be associated with a higher proportion of patients continuing initial treatment with more number of stable days. The ICER of paliperidone ER compared to that of olanzapine was NT$400 per stable day. Conclusion: Paliperidone ER is a cost-effective alternative to olanzapine or quetiapine for treating patients with schizophrenia in Taiwan.