In Tunisian climate, both heating in winter and cooling in summer are required to reach comfort levels. Due to the significant increase in building energy consumption, insulation of external walls is recently applied with a thickness typically ranging between 4 cm and 5 cm regardless of structure and orientation of walls and of economic parameters. In the present study, optimum insulation thickness, energy saving and payback period are calculated for a typical wall structure based on both cooling and heating loads. Yearly transmission loads are rigorously estimated using an analytical method based on Complex Finite Fourier Transform (CFFT). Considering different wall orientations, the west and east facing walls are the least favourite in the cooling season, whereas the north-facing wall is the least favourite in the heating season. A life-cycle cost analysis over a building lifetime of 30 years shows that the south orientation is the most economical with an optimum insulation thickness of 10.1 cm, 71.33% of energy savings and a payback period of 3.29 years. It is noted that wall orientation has a small effect on optimum insulation thickness, but a more significant effect on energy savings which reach a maximum value of 23.78 TND/m(2) in the case of east facing wall. A sensitivity analysis shows that economic parameters, such as insulation cost, energy cost, inflation and discount rates and building lifetime, have a noticeable effect on optimum insulation and energy savings. Comparison of the present study with the degree-days model is also performed. (C) 2010 Elsevier Ltd. All rights reserved.