OBJECTIVES: Illness is associated with significant economic burden on both individual and society. This study aims at measuring the cost of illness in Korea in 2007. METHODS: We estimate both direct and indirect costs of illness using a prevalence-based approach. Direct cost includes medical expenditures(in-patient, out-patient), caregiver’s cost and traffic costs. As indirect costs, productivity loss representing lost workdays due to illness and lost earnings due to premature death is estimated based on human capital theory. The results are reported according to age, sex, diseases and each cost items in USA Purchasing Power Parity(PPP) Dollars at 3% discount rate. The major data sources are National Health Insurance Statistical Yearbook, Annual Report on the Cause of Death Statistics, and Survey Report on Wage Structure. We also use other information such as the Korean Statistical Information System. We provide the results according to age, sex, and diseases at each cost items. RESULTS: The cost of illness of Korea in 2007 is 56,633,552 million Won(75,523 million PPP US$) based on 3% discount rate, which represents approximately 6.28% of GDP. Of this total, 47.8%(36,065 million PPP US$) is devoted to medical costs, followed by productivity loss(46.4%; 35,053 million PPP US$), caregiver’s costs(3.9%; 2,962 million PPP US$), and transportation cost(1.9%; 1,444 million PPP US$)). The cost of illness is higher for males(45,912 million PPP US$) than females(29,611 million PPP US$), which results from the difference of productivity loss cost. However, direct cost of females is higher than that of males. We find that the cost of aged 40~49 accounts for the highest proportion(23.5%) followed by aged 50~59(22.5%). The four major diseases incurring highest costs are as follows; neoplasms(18.76%), circulatory system(13.92%), digestive system(13.55%) and respiratory system(10.53%). CONCLUSIONS: This study could provide basic information for establishing prioritizations of health policies to reduce economic burden of illness and enhance quality of life.