OBJECTIVES:  Diabetes mellitus (DM) is recognised as a major health problem. Its chronic nature and complications make it a costly disease. The aim of this study is two-fold: (1) to describe the methods used in the identified cost-of-illness (COI) studies of DM and (2) to summarise their study findings regarding the economic impact of DM. METHODS: This is a systematic review of MEDLINE and Scopus journal articles reporting the cost of type-1 and/or type-2 DM that were published in English from 2007 to 2011. Costs reported in the included studies were converted to US dollars for comparison purposes. RESULTS: The systematic search yielded 30 articles that met the predetermined criteria. The studies varied considerably in their study design, perspective and included cost categories. Estimates for the total annual costs of DM ranged from US$141.6 million to US$174 billion; direct costs ranged from US$150 to US$14,060 per patient per year (pppy) whereas indirect costs ranged from US$39.6 to US$7,164 pppy. Inpatient cost was the major contributor to direct cost in half of the studies that included inpatient costs, physician services and medications. In addition, patients with DM consumed significantly more health care resources and incurred higher health care costs than patients without DM. CONCLUSIONS: There is a considerable economic burden associated with DM, not only on the health care system, but also on the individual and society as a whole. Future research should focus on improving methods of estimating costs, enhancing the interpretation of study findings and facilitating comparisons between studies.