OBJECTIVES To estimate the economic impact of malnutrition on annual direct cost in Spanish institutionalized or community-dwelling older adults.  METHODS A systematic review was carried out on the economic burden and use of medical resources associated with malnutrition in institutionalized or community-dwelling older adults. National and international databases until December 2013 were searched. Based on results from the literature review, an Excel-based tool was developed to estimate the annual cost difference between malnourished and well-nourished institutionalized and community-dwelling older adults in Spain. Malnutrition prevalence, annual frequency of general practitioner (GP) visits and hospitalizations were the main inputs considered in the model. Unit costs were derived from healthcare cost databases available in Spain (Euros, 2014). One-way sensitivity analysis (OWSA) was performed.  RESULTS The results of the systematic review showed that malnutrition implies higher medical costs in the study population, particularly due to the length of hospital stay, number of hospital admissions and GP visits. Economic results showed that the annual cost associated with the use of resources of a malnourished patient (€ 5,000.66) was 3.5 times higher than that of a well-nourished (€ 1,433.78). OWSA showed that prevalence of malnutrition was the variable with the greatest impact on results. Decreasing the prevalence of malnutrition according to minimum values identified in the literature (from 15.6% and 4.4%, to 2% and 3% in institutionalized and community-dwelling patients respectively), caused the annual cost per patient with malnutrition to drop from € 5,000.66 to € 2,511.83, while increasing it to the maximum values (62% and 23%, respectively), implied a rise from € 5,000.66 to € 24,291.93 in the annual cost per patient. CONCLUSIONS Adopting measures to reduce the prevalence of malnutrition in institutionalized or community-dwelling older adults would reduce by up to 50% the annual cost per patient associated to GP visits and hospitalizations.