It remains a matter of debate whether displaced fractures of the neck of the femur should be treated by internal fixation or arthroplasty. We have compared the two methods with regard to complications, mortality and functional outcome. We studied 409 patients, aged 70 years and over, with subcapital fractures graded as Garden 3 or 4, in a two-year prospective multicentre study from 12 Swedish hospitals. They were randomised to internal fixation or arthroplasty. Patients who were mentally confused, bedridden or in a nursing-home were excluded from the survey. After two years the rate of failure was 43% in the internal fixation (IF) and 6% in the arthroplasty group (p < 0.001). In the IF group 36% had impaired walking and 6% had severe pain compared with 25% and 1.5%, respectively, in the arthroplasty group (both p < 0.05). There was no difference in mortality. With a high rate of failure and poor functional outcome after IF, we recommend primary arthroplasty for displaced fractures of the neck of the femur in patients over 70 years of age.