OBJECTIVES: To estimate the clinical and economic consequences of Continuous Subcutaneous Insulin Infusion (CSII) versus Multiple Daily Injection (MDI) for type 1 diabetes (DM1) through cost-utility analysis, from the perspective of the Mexican Social Security Institute (IMSS). METHODS: We used a validated simulation model (CORE Model), together with published literature for clinical, quality of life and therapy effectiveness. Demographic information and incident complications for 131 patients with DM1 from the 21st Century Hospital (IMSS) were incorporated into the simulation. Direct and indirect cost data were obtained from the IMSS and Secretary of Health (SSA) National Economic Information. A simulation of the clinical and economic consequences in a lifetime follow-up of therapy was performed. Direct and indirect costs with a discount rate of 3% were input to the model. RESULTS: Lifetime, treatment with CSII gained 8.5 quality-adjusted life years vs. 7.6 quality-adjusted life years for MDI therapy. Over 50 years of treatment, CSII versus MDI, had an incremental direct cost of 422,187 Mexican Pesos (MXP) per quality adjusted life year (QALY). For indirect costs, CSII is cost saving relative to MDI (saving 158,831 MXP/QALY). For combined direct and indirect costs, the incremental cost-effectiveness ratio for CSII vs. MDI was 283,356 MXP/QALY. CONCLUSIONS: Better glycemic control, and increased quality of life for DM1 patients treated with CSII demonstrated incremental cost effectiveness below the willingness to pay threshold set by the World Health Organization (510,300 MXP). This makes CSII a cost effective treatment alternative to MDI in Mexico. The higher incremental direct cost of CSII relative to MDI is compensated by the savings in indirect costs.