&NA; BACKGROUND. The objective structured clinical examination (OSCE) has become an accepted technique for the evaluation of clinical competence in medicine. Although advances have been made in our knowledge of the psychometric aspects of the OSCE, extremely little has been written about feasibility and cost issues. Given the current economic imperative to control costs and the extremely scant literature on the costs of developing and administering an examination in medicine, the authors felt it timely and relevant to explore issues related to the cost of the OSCE. METHOD. In 1991–92 and in 1992–93, costs and time requirements to implement and administer a structured oral (SO) examination and a six‐station OSCE for a surgical clerkship at the University of Toronto Faculty of Medicine were gathered by review of invoices, interviews with those involved, and perusal of diaries kept by staff. RESULTS. To develop and administer the six‐station OSCE, 327.5 hours of staff and faculty time were required for each rotation of surgical clerks (8.2 hours per student). The SO examination required 110 hours of staff and faculty time (2.75 hours per student). Direct expenses for the OSCE amounted to U.S. $6.90 per student per station, compared with no direct expense for the SO examination. CONCLUSION. The OSCE was more time‐consuming and more expensive in human and material costs than the SO examination. However, costs of the OSCE can be substantially reduced from approximately U.S. $35 to U.S. ! per student per station if test developers, standardized patients, support staff, and examiners can donate their time. The authors compare the costs and time requirements of their OSCE with those of other OSCEs reported in the literature, and they provide guidelines to assist educators in deciding whether the costs of an OSCE are justifiable in the educators' individual settings.