Narrow-band imaging with magnification endoscopy (NBI-ME) allows real-time visual assessment of the mucosal surface and vasculature of the gastrointestinal tract. This study aimed to determine the performance of NBI-ME combined with the water immersion technique (NBI-ME-WIT) in detecting villous atrophy.All patients who underwent gastroscopy were included. The duodenum was further examined with NBI-ME-WIT only after examination with white light endoscopy did not reveal a cause of anaemia or dyspepsia. Targeted biopsies were taken of visualised areas. NBI-ME-WIT findings were compared with the final histopathological analysis. We calculated the sensitivity (Sn), specificity (Sp), positive predictive value (PPV) and negative predictive value (NPV) of NBI-ME-WIT in detecting villous atrophy and the hypothetical cost saved by using a biopsy-avoiding approach.124 patients (83 female) with a mean age of 46 (range 18-82) years were included. The most common indication for gastroscopy was abdominal pain (39%), followed by anaemia (35%), chronic diarrhoea/altered bowel habits (19%) and dyspepsia (6%). NBI-ME-WIT was able to detect all nine patients with villous atrophy - eight patchy and one total villous atrophy. The Sn, Sp, PPV and NPV of NBI-ME-WIT in detecting villous atrophy were 100.0%, 99.1%, 90.0% and 100.0%, respectively. Taking into account the cost of biopsy forceps (AUD 17) and pathology (AUD 140), this biopsy-avoidance strategy could have saved AUD 18,055 in these patients.NBI-ME-WIT is a specific and sensitive tool to recognise and accurately diagnose villous atrophy. Biopsies can be avoided in patients with normal-sized villi, which may decrease the overall cost of the procedure.