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We have conducted a new analysis of the incidence of fetal alcohol syndrome (FAS) and its economic impact based on prospectively gathered data of consecutive pregnancies. This more conservative analysis reflects our concern over possible inclusion of "false positives" in our previous estimate and now puts the overall rate in the western world at 0.33 cases per 1000. The estimate among whites is 0.29 per 1000 compared with 0.48 per 1000 for blacks. We did not include estimates for native Americans owing to the absence of prospectively gathered data on FAS for this group. Retrospective studies suggest larger disparities. Both prospective and retrospective studies may be influenced by examiner bias especially for minorities since minorities are often evaluated against standards derived from whites. Based on our estimates and the number of black and white children born each year, we estimate that about 1200 children are born with FAS each year in the United States. This is a probable lower limit based on considerations of ascertainment and absence of relevant information for other minorities such as native Americans. In calculating economic costs, we have now adjusted our estimates to take into account costs that would be incurred whether cases were FAS or not, and also have now included estimated costs for anomalies in FAS cases not considered in previous estimates. Based on these considerations, we now estimate the incremented annual cost of treating this disorder at $74.6 million. About three-quarters of this economic burden is associated with care of FAS cases with mental retardation.(ABSTRACT TRUNCATED AT 250 WORDS)