Background The purpose of this article is to evaluate the cost-effectiveness of school closure during a potential influenza pandemic and to examine the trade-off between costs and health benefits for school closure involving different target groups and different closure durations. Methods We developed two models: a dynamic disease model capturing the spread of influenza and an economic model capturing the costs and benefits of school closure. Decisions were based on quality-adjusted life years gained using incremental cost-effectiveness ratios. The disease model is an age-structured SEIR compartmental model based on the population of Oslo. We studied the costs and benefits of school closure by varying the age targets (kindergarten, primary school, secondary school) and closure durations (1–10 weeks), given pandemics with basic reproductive number of 1.5, 2.0 or 2.5. Results The cost-effectiveness of school closure varies depending on the target group, duration and whether indirect costs are considered. Using a case fatality rate (CFR) of 0.1-0.2% and with current cost-effectiveness threshold for Norway, closing secondary school is the only cost-effective strategy, when indirect costs are included. The most cost-effective strategies would be closing secondary schools for 8 weeks if R 0 =1.5, 6 weeks if R 0 =2.0, and 4 weeks if R 0 = 2.5. For severe pandemics with case fatality rates of 1-2%, similar to the Spanish flu, or when indirect costs are disregarded, the optimal strategy is closing kindergarten, primary and secondary school for extended periods of time. For a pandemic with 2009 H1N1 characteristics (mild severity and low transmissibility), closing schools would not be cost-effective, regardless of the age target of school children. Conclusions School closure has moderate impact on the epidemic’s scope, but the resulting disruption to society imposes a potentially great cost in terms of lost productivity from parents’ work absenteeism.