OBJECTIVES Canagliflozin is a novel drug for treatment of diabetes belonging to the drug class known as sodium glucose co-transporter 2 (SGLT2) inhibitors. To evaluate the cost-effectiveness of canagliflozin in dual therapy (add-on to metformin) compared to sitagliptin and sulfonylurea (SU), in triple therapy (add on to metformin and SU) compared to sitagliptin and as add-on to insulin versus placebo. METHODS The IMS CORE Diabetes Model was used to evaluate the cost-effectiveness of canagliflozin (using a weighted average of 80/20 for the 100 mg and 300 mg dosage, respectively) versus the aforementioned comparators using Norwegian-specific data, where available. RESULTS In dual therapy, as add-on to metformin versus sitagliptin, canagliflozin appears to dominate sitagliptin with average cost savings of 606 NOK and an average QALY gain of 0.030 and as add on to metformin canagliflozin is cost-effective versus SU, with an incremental cost-effectiveness ratio (ICER) of 79,309 NOK and an incremental cost of 5,757.80 NOK and an average QALY gain of 0.0726. As add on to insulin canagliflozin appears to dominate placebo with an incremental cost saving of 13,506 NOK and an incremental QALY of 0.080. In triple therapy as add on to metformin and SU canagliflozin appears to dominate sitagliptin with average cost savings of 556 NOK and an average QALY gain of 0.021. CONCLUSIONS Canagliflozin is associated with cost savings and QALY gain compared to sitagliptin in dual therapy as add-on to metformin, and in triple therapy as add on to metformin and SU. Canagliflozin will be a cost-effective alternative to SU in dual therapy as add on to metformin. Adding canagliflozin to insulin will be cost-effective compared with placebo i.e. it is cost-effective to add canagliflozin treatment rather than not.