The report provides estimates of the social costs of tobacco use in NSW for the financial year 2006/07. It also presents estimates of the value of the social benefits which would accrue from a possible reduction in NSW smoking prevalence from its 2007 level of 18.6 per cent to 12.6 per cent in 2016. It highlights the substantial costs smoking imposes on the NSW community and reinforces the need for more public health efforts to reduce smoking prevalence.