Background: The safe use of a prosthesis in activities of daily living is key for transfemoral amputees. However, the number of falls varies significantly between different prosthetic device types. This study aims to compare medical and economic consequences of falls in transfemoral amputees who use the microprocessor-controlled knee joint C-Leg with patients who use non-microprocessor-controlled (mechanical) knee joints (NMPK). The main objectives of the analysis are to investigate the cost-effectiveness and budget impact of C-Legs in transfemoral amputees with diabetes mellitus (DM) and without DM in Germany. Methods: A decision-analytic model was developed that took into account the effects of prosthesis type on the risk of falling and fall-related medical events. Cost-effectiveness and budget impact analyses were performed separately for transfemoral amputees with and without DM. The study took the perspective of the statutory health insurance (SHI). Input parameters were derived from the published literature. Univariate and probabilistic sensitivity analyses (PSA) were performed to investigate the impact of changes in individual input parameter values on model outcomes and to explore parameter uncertainty. Results: C-Legs reduced the rate of fall-related hospitalizations from 134 to 20 per 1000 person years (PY) in amputees without DM and from 146 to 23 per 1000 PY in amputees with DM. In addition, the C-Leg prevented 15 or 14 fall-related death per 1000 PY. Over a time horizon of 25 years, the incremental cost-effectiveness ratio (ICER) was 16,123 Euro per quality-adjusted life years gained (QALY) for amputees without DM and 20,332 Euro per QALY gained for amputees with DM. For the period of 2020–2024, the model predicted an increase in SHI expenditures of 98 Mio Euro (53 Mio Euro in prosthesis users without DM and 45 Mio Euro in prosthesis users with DM) when all new prosthesis users received C-Legs instead of NMPKs and 50% of NMPK user whose prosthesis wore out switched to C-Legs. Results of the PSA showed moderate uncertainty and a probability of 97–99% that C-Legs are cost-effective at an ICER threshold of 40,000 Euro (˜ German GDP per capita in 2018) per QALY gained. Conclusion: Results of the study suggest that the C-Leg provides substantial additional health benefits compared with NMPKs and is likely to be cost-effective in transfemoral amputees with DM as well as in amputees without DM at an ICER threshold of 40,000 Euro per QALY gained. © 2020, The Author(s).