Objective: To assess the relationship between economic burden and physical functioning or disease severity in rheumatoid arthritis (RA). Methods: Medline, Embase, BIOSIS, Derwent Drug File, the Cochrane library and NHS-EED were searched on 12th March 2007 for cost-of-illness (COI) and cost-effectiveness studies in RA. Results: A total of 909 unique citations were retrieved. Nine studies presented COI results; with seven studies presenting data on the relationship between direct and indirect costs and physical functioning or disease severity. The Health Assessment Questionnaire (HAQ) was used in three studies to assess functional ability. Higher HAQ scores at baseline were found to be significant predictors of higher future direct costs in two studies. A third study used both HAQ and the Hannover Functional Status Questionnaire (FFbH) to assess functional ability. For patients with an HAQ score <1.2 (or >70% of full FFbH function) the mean annual direct costs were €3225 and indirect costs were €8,811; for patients with an HAQ score between 1.2 and 1.7 (FFbH function of 50 to 70%) mean annual direct costs were €5,661 and indirect costs were €21,580; whilst for patients with an HAQ score higher than 1.7 (FFbH functional status of <50% of normal) mean annual direct costs were €8,403 and indirect costs were €34,915. A further two studies using the FFbH confirmed these findings of increased costs with decreasing functional ability. Finally, in two studies assessing the relationship between disease severity and costs, there was a statistically significant difference (p<0.001) in both direct and indirect costs for each level increase in disease severity (based on ACR functional classes I, II, III and IV) and increases in costs with increasing disease severity categorised as no disability, mild, moderate and severe. Conclusion: The economic burden of RA appears highly dependent on both the level of functional disability and disease severity.