US hospitals use observation units (OUs) for safe and cost-effective management of low-risk to moderate-risk patients presenting to the ED with chest pain. This study retrospectively compared the utility of an ED observation unit (EDOU) with an inhospital observation unit (IHOU) for chest pain at the same institution. A 5-month period during which patients with chest pain were admitted to the EDOU was compared with a 5-month period during which patients with chest pain were admitted to the IHOU. During the 5-month EDOU period, 440 (36.9%) of 1190 patients with chest pain presenting to the ED were admitted for observation. During the IHOU period, 973 (69.3%) of 1404 patients with chest pain presenting to the ED were admitted for observation (P<.0001). Fewer patients with chest pain were converted to full inpatient admission from the EDOU, 35 (7.9%) of 440, when compared with the IHOU, 187 (19.2%) of 973 (P<.0001). Mean cost for each patient was US $889.87 (95% CI 862.8-916.9) versus US $1039.70 (95% CI 991.7-1087.7) for each IHOU patient. We conclude that the EDOUs are more cost-effective than IHOUs for management of low-risk to moderate-risk patients with chest pain.