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Background Many schools have been cutting physical education (PE) classes due to budget constraints, which raises the question of whether policymakers should require schools to offer PE classes. Evidence suggests that PE classes can help address rising physical inactivity and obesity prevalence. However, it would be helpful to determine if requiring PE is cost-effective. Methods We developed an agent-based model of youth in Mexico City and the impact of all schools offering PE classes on changes in weight, weight-associated health conditions and the corresponding direct and indirect costs over their lifetime. Results If schools offer PE without meeting guidelines and instead followed currently observed class length and time active during class, overweight and obesity prevalence decreased by 1.3% (95% CI: 1.0%-1.6%) and was cost-effective from the third-party payer and societal perspectives ($5,058 per disability-adjusted life year [DALY] averted and $5,786/DALY averted, respectively, assuming PE cost $50.3 million). When all schools offered PE classes meeting international guidelines for PE classes, overweight and obesity prevalence decreased by 3.9% (95% CI: 3.7%-4.3%) in the cohort at the end of five years compared to no PE. Long-term, this averted 3,183 and 1,081 obesity-related health conditions and deaths, respectively and averted ≥$31.5 million in direct medical costs and ≥$39.7 million in societal costs, assuming PE classes cost ≤$50.3 million over the five-year period. PE classes could cost up to $185.5 million and $89.9 million over the course of five years and still remain cost-effective and cost saving respectively, from the societal perspective. Conclusion Requiring PE in all schools could be cost-effective when PE class costs, on average, up to $10,340 per school annually. Further, the amount of time students are active during class is a driver of PE classes’ value (e.g., it is cost saving when PE classes meet international guidelines) suggesting the need for specific recommendations.