Skin diseases have been shown to have a significant adverse impact on the health-related quality of life of patients that may be underestimated by objective assessments of clinical severity. The main aim of this study was to measure the health-state utilities on a scale between 0 (dead) and 1 (full health) of patients with psoriasis and atopic eczema, and to measure the willingness to pay for a cure for psoriasis and atopic eczema. A second aim was to analyse how these measures are related to different dimensions of health-related quality of life, as measured by general and disease-specific quality of life instruments and a subjective measure of disability activity. This study was based on data from a questionnaire administered to, and interviews conducted with, 366 patients with psoriasis and atopic eczema aged 17-73 years, attending the dermatology outpatient clinic in Uppsala, Sweden from November 1996 to December 1997. The survey included: a rating scale question, a time trade-off question, a standard gamble question, a dichotomous choice willingness to pay question, a bidding-game willingness to pay question, a generic quality of life instrument (SF-36), a disease-specific quality of life instrument (the Dermatology Life Quality Index) and a subjective measure of disease activity (on a visual analogue scale). The mean health-state utility was 0.69 (rating scale), 0.88 (time trade-off) and 0.97 (standard gamble) for patients with psoriasis. The corresponding health-state utilities for patients with atopic eczema were 0.73, 0.93 and 0.98. On average, patients were willing to pay between 1253 and 1956 Swedish crowns (SEK) per month for a psoriasis cure and between SEK 960 and 1083 per month for an atopic eczema cure ($1 = SEK 8.25 and pound1 = SEK 13.23). The health-state utilities were related to SF-36, the Dermatology Life Quality Index and disease activity in the expected direction and the correlations were strongest for rating scale and weakest for standard gamble. The willingness to pay was correlated with the Dermatology Life Quality Index and disease activity, but not with SF-36. The study indicates that it is feasible to measure health-state utilities and willingness to pay in this patient population, and the sizeable willingness to pay suggests that skin diseases are associated with substantial reductions in quality of life.