This study compares the costs and outcomes of domiciliary and hospital-based chemotherapy, using a prospective randomized cross-over design. Eighty-seven eligible patients were recruited from oncology services at two metropolitan hospitals in Sydney, Australia. Forty patients completed study evaluation requirements, having two months of chemotherapy in each location (home and hospital). The domiciliary service was staffed by hospital-based oncology nurses. Marginal costs of domiciliary treatment over hospital treatment were estimated from the health service perspective. Home-based care was more expensive, largely due to extra nurse time. About half of the eligible patients (n = 87) and 73 percent of the evaluated patients (n = 40) preferred domiciliary care. Most evaluated patients and their informal carers were satisfied with the medical care provided, regardless of location. Patient needs were well met in either location, and no differences were found in quality of life. At current throughput rates, providing chemotherapy in the home was more expensive than providing it in hospital. However, if the demand for chemotherapy were to exceed ward capacity by up to 50 percent, moving chemotherapy into the home could provide a less costly strategy for the expansion of a chemotherapy service without compromising patient outcomes.