The association between AIDS and intravenous drug abuse is emerging as a critical component of the AIDS epidemic due to several factors: (1) the high rate of infection of this group with the HTLV-III virus-approximately 50%; (2) the risk of infection to others through shared needles, sexual contact, and intrauterine transmission to the fetus; and (3) the impact of large numbers of new cases of AIDS among addicts on the health care services of a few urban areas. This paper outlines the projected dimensions of the AIDS epidemic among intravenous drug abusers in New York City and its implications for hospital utilization and local health care expenditures. These considerations indicate the urgent need for a rapid expansion of addiction treatment services and modification of treatment objectives to deal with this new problem.