Drug-resistant tuberculosis (TB) is a serious emerging problem in many low-resource countries. TB control programmes are uncertain of which drug susceptibility tests (DSTs) to use and when to test patients. We predicted the potential cost-effectiveness of different DST strategies, in settings with varying prevalence of drug resistance. Using decision analysis, we assessed the cost-effectiveness of conventional and rapid DSTs for previously diagnosed smear-positive TB cases. Five different time-points were considered for administering DSTs. Different initial drug resistance and HIV scenarios were also considered. All DST scenarios in the wide range of settings considered were found to be cost-effective. The strategy of performing a rapid DST that detects any form of isoniazid (INH) and rifampicin (RIF) resistance for all patients before the initiation of treatment was predicted to be the most cost-effective strategy. In a setting with moderate drug resistance, the cost per disability-adjusted life year gained was as low as US$744. Our findings support the roll-out of rapid drug susceptibility testing at the moment of diagnosis to detect any form of INH and RIF resistance in all countries with moderate or greater burdens of drug-resistant TB.