A systematic approach for optimization of insulation material thickness is developed in this paper and then applied to Palestine. The optimization is based on the life cycle cost analysis. Generalized charts for selecting the optimum insulation thickness as a function of degree days and wall thermal resistance are prepared. Life cycle savings of the insulated buildings are computed for Palestine. Savings up to 21 $/m(2) of wall area are possible for rock wool and polystyrene insulation. Payback periods between 1 and 1.7 years are possible for rock wool and payback periods between 1.3 and 2.3 years for polystyrene insulation, depending on the type of wall structure.