OBJECTIVES: The economic burden of Multiple Sclerosis (MS) on society and the individuals concerned is not known. Documenting such costs is essential for several reasons: costs of illness  is a key factor of optimal disease management policies, knowledge of cost is useful for allocating research and development  .The aim of our study as the first pharmacoeconomic investigation in Iran  was to estimate the costs of multiple sclerosis according to severity of disease. METHODS: Total, direct and indirect costs were compared in 160 patients divided into three groups categorized by disease severity: stage I Expanded Disability Status Scale (EDSS <2.5), stage II (EDSS 3- 4.5) and stage III (EDSS >5).The majority of these patients (94%) developed relapsing- remitting MS.A minority of the patients (0.2-4 %) developed secondary progressive and primary progressive MS. Cost evaluation was performed from the societal perspective and covered the one-year period. The study was carried out at the Division of Neurology at Ghaem Hospital and MS association in Mashhad in northeast of Iran and was approved by the local ethics committee. RESULTS: The mean total cost/patient for one year was estimated at $27,095, $27,997and $31,662 for stage I, II and III, respectively. Both direct and indirect costs increased with MS progression. For indirect cost the main item was productivity loss. The mean extra medicine (treatments for  MS symptoms   and adverse effects of medications) cost/patient for one year was calculated at $19,036 .   CONCLUSIONS: This study confirms that MS represents a high economic burden to patients and society, with direct costs greatly exceeding indirect costs. As costs increase with disease progression, treatment efforts should focus on patients in the early stages of MS. Disease support system that monitors a variety of common progressive signs for the MS individuals is a key element of a management program as well.