The cost analysis was undertaken as part of the evaluation of a new prison treatment unit that provides intermediate-term, residential care for inmates with mental illness. To measure the new unit's contribution to the cost effectiveness of the reduction in inmate infractions, the study estimated the cost of infractions. Data sources were interviews with staff involved in the processing of infractions, from whom researchers obtained estimates of the time expended in various stages of the disciplinary process; official publications and records, from which the study obtained cost rates; and a survey of the department's computerized inmate records, which provided estimates of custody demotions due to infractions. The data covered major and minor infraction incidents recorded at the study site during 6-month periods in late 1994 and early 1995. Minor infractions totaled 2,040; major infractions totaled 792. Major infractions constituted 90 percent of inmate disciplinary costs, primarily because of the costs of the primary sanctions: disciplinary segregation and loss of good time. The study estimated an average cost of $970 per infraction. These fixed costs do not respond to marginal changes in numbers of infractions, but help to estimate the additional system costs that successful treatment may prevent in the long run. Like the costs of imprisonment in the free community, these costs must be considered in disciplinary and treatment policies within prisons. 3 tables, 3 figures, and 14 references