In condition-based maintenance (CBM), the item is preventively replaced if failure risk exceeds a pre-determined threshold. The optimal replacement threshold is often determined such that the average maintenance costs per unit time due to preventive and failure replacements is minimized. It is assumed that inspections are performed at equal time intervals with no cost. However, in many practical situations, inspection cost is considerable and, thus, it is reasonable to inspect less during the time the item is in healthier states, and, to perform more inspections as the item degrades, namely, using a condition-based inspection scheme as opposed to a constant interval inspection scheme. In this paper a two-step approach, for the determination of the replacement threshold and a cost-effective condition-based inspection scheme for CBM, is proposed. In the first step, assuming that inspections are performed at equal time intervals with no cost, the optimal replacement threshold is determined. This assumption is, then, relaxed and its consequences on total average cost are evaluated using a proposed iterative procedure to obtain the condition-based inspection scheme. The proposed approach is illustrated through a numerical example.