Carotid endarterectomy is a commonly performed but controversial procedure. We developed from the literature a list of 864 possible reasons for performing carotid endarterectomy, and asked a panel of nationally known experts to rate the appropriateness of each indication using a modified Delphi technique. On the basis of the panel's ratings, we determined the appropriateness of carotid endarterectomy in a random sample of 1302 Medicare patients in three geographic areas who had had the procedure in 1981. Thirty-five percent of the patients in our sample had carotid endarterectomy for appropriate reasons, 32 percent for equivocal reasons, and 32 percent for inappropriate reasons. Of the patients having inappropriate surgery, 48 percent had less than 50 percent stenosis of the carotid artery that was operated on. Fifty-four percent of all the procedures were performed in patients without transient ischemic attacks in the carotid distribution. Of these procedures, 18 percent were judged appropriate, as compared with 55 percent judged appropriate in patients with transient ischemic attacks in the carotid distribution. After carotid endarterectomy, 9.8 percent of patients had a major complication (stroke with residual deficit at the time of hospital discharge or death within 30 days of surgery). We conclude that carotid endarterectomy was substantially overused in the three geographic areas we studied. Furthermore, in situations in which the complication rate is equal to or above the study's aggregate rate, carotid endarterectomy would not be warranted, even in cases with an appropriate indication, because the risks would almost certainly outweigh the benefits.