Background <p>Tackling intensified fire regimes in Euro-Mediterranean regions requires more fire-resistant and fire-resilient landscapes. Fire-smart management can be helpful, but its effectiveness and economic performance remain unclear. We addressed this gap by looking at cost-effectiveness and economic sustainability in fire-smart (focused on fire prevention) against BAU—business-as-usual (focused on fire suppression) strategies through an integrative approach based on the Fire Protection Ecosystem Service (FPES) concept. FPES results from the capacity of landscapes to regulate fire regimes, benefiting humans by mitigating the harmful effects of fire. We modelled and simulated fire activity and landscape dynamics under land use and climate change scenarios (RCP 4.5 and 8.5, 2020–2050) with fire-smart (FFS—Forest-based, SPFS—Silvopasture-based, and FFS + SPFS—mixed) and BAU strategies in a Mediterranean mountain landscape of Portugal. Then, we assessed the landscape’s capacity to regulate extreme fire events, ecosystem services supply and losses, fire suppression and land management costs. Lastly, we applied cost-effectiveness and cost-benefit analysis to compare fire-smart against BAU strategies.</p> Results <p>Fire-smart strategies were more cost-effective and economically sustainable than BAU in both climate scenarios. Fire-smart strategies decreased extreme fires compared to BAU, particularly the FFS + SPFS strategy, where fuel-type conversion and landscape-level fuel treatments were combined. Nevertheless, the capacity to regulate extreme fires declined under RCP 8.5, although to a lesser extent in fire-smart strategies. Besides, increased losses in ecosystem services and an upward trend in suppression costs suggest a potential decrease in FPES, especially under RCP 8.5. Nonetheless, fire-smart strategies were cost-saving because they minimized losses and maximized ecosystem services supply while reducing fire suppression expenditures, thus mitigating potential losses of FPES and offsetting implementation costs. Fire-smart strategies, particularly the FFS + SPFS strategy, were more sustainable than BAU, as they delivered higher net benefits to society, especially when long-term over immediate benefits are preferred.</p> Conclusions <p>Fire management policymaking in Euro-Mediterranean countries must prioritize fire-smart over suppression-focused strategies to foster fire-regulating functions and protection against fire’s harmful impacts. Also, planning and management of fire-prone landscapes must consider integrative approaches based on FPES wherein climate-fire-landscape dynamics and fire-related costs and benefits are evaluated to ensure cost-effective and sustainable fire management.</p>