Climate change, increased wildland fuels, and residential development patterns in fire-prone areas all combine to make wildfire risk mitigation an important public policy issue. One approach to wildfire risk mitigation is to encourage homeowners to use fire-resistant building materials and to create defensible spaces around their homes. We develop a theoretical model of interdependent household wildfire risk and mathematically introduce two new concepts of the benefits accruing from hazard mitigation: direct and spillover (indirect) damage averted. We explore how firewise communities can best spend and position mitigation resources to maximize the sum of direct and spillover damage averted. Simulating wildfire behavior within a fire-prone community, our results indicate that homeowners' wildfire risk reduction actions can have significant, positive spillover effects on the wildfire risk of neighboring houses. In such cases, individual homeowners may engage in inefficient levels of wildfire risk mitigation when viewed from the community perspective. We use a simulation approach to demonstrate that wildfire risk reduction is most effective when concentrated in houses at the interface of communities and wildlands. © 2008 by the Society of American Foresters. Abstract reproduced by permission.