Context: Prostate-specific antigen screening has led to an increase in the diagnosis and treatment of localized prostate cancer. However, the role of active treatment of low- and intermediate-risk disease in elderly men is controversial. Objective: To estimate the association between treatment (with radiation therapy or radical prostatectomy) compared with observation and overall survival in men with low- and intermediate-risk prostate cancer. Design and Setting: Observational US cohort from Surveillance, Epidemiology, and End Results Medicare data. Patients: At total of 44 630 men aged 65 to 80 years who were diagnosed between 1991 and 1999 with organ-confined, well- or moderately differentiated prostate cancer and who had survived more than a year past diagnosis. Patients were followed up until death or study end (December 31, 2002). Patients were classified as having received treatment (n=32 022) if they had claims for radical prostatectomy or radiation therapy during the first 6 months after diagnosis. They were classified as having received observation (n=12 608) if they did not have claims for radical prostatectomy, radiation, or hormonal therapy. Patients who received only hormonal therapy were excluded. Main Outcome Measure: Overall survival. Results: At the end of the 12-year study period, 4663 men (37%) in the observational group and 7639 men (23.8%) in the treatment group had died. The treatment group had longer 5- and 10-year survival than the observation group. After using propensity scores to adjust for potential confounders (tumor characteristics, demographics, and comorbidities), there was a statistically significant survival advantage associated with treatment (hazard ratio, 0.69; 95% confidence interval, 0.66-0.72). A benefit associated with treatment was seen in all subgroups examined, including older men (aged 75-80 years at diagnosis), black men, and men with low-risk disease. Conclusions: This study suggests a survival advantage is associated with active treatment for low- and intermediate-risk prostate cancer in elderly men aged 65 to 80 years. Because observational data cannot completely adjust for potential selection bias and confounding, these results must be validated in randomized controlled trials of alternative management strategies in elderly men with localized prostate cancer.