OBJECTIVES: To estimate the direct out-of-pocket medical costs of treating major diseases attributable to smoking in India. METHODS: Indian data on burden of smoking related illnesses was compiled on lines of the BENESCO (Benefits of smoking cessation on outcomes) model by secondary analysis of existing datasets from census and National Sample Survey (NSS), 2004. The prevalence of smoking(cigarettes and bidis) was estimated by adjusting census projected population data with smoking rate found in the National Family & Health Survey – 3 (NFHS-3), 2005-06. Data on age and gender-wise disease prevalence and unit cost of treatment of diseases was obtained from NSS. A prevalence-based, disease-specific approach was used to estimate the direct medical costs of treating cancer and other tumors, bronchial asthma, tuberculosis, respiratory diseases, hypertension and coronary heart disease attributable to smoking. RESULTS: Analysis of data from NFHS – 3 estimated that there were 98.2 million male and 4 million female smokers in India between 15 to 49 years of age. A total of 1.1 million hospitalizations and 90.5 million outpatient visits for 6 major diseases among adults were attributed to smoking annually. The total annual direct out-of-pocket medical cost for treating 6 major diseases was found to be Indian National Rupees 198 billion (US$ 4.4b). The total cost attributable to smoking was estimated to be INR 46 billion (US$ 1b) (i.e. 23% of the total); INR 33.8 billion (US$ 761m) for outpatient care and INR 12.3 billion (US$ 276m) for inpatient care. The total annual smoking attributable cost of treatment was highest for heart disease at INR 14.5 billion (US$ 327m) followed by bronchial asthma INR 8.8 billion (US$ 199m) and hypertension INR 8.6 billion (US$ 195m). CONCLUSIONS: The smoking epidemic in India is a major preventable public health problem. The direct out-of-pocket medical costs of treating major diseases attributable to smoking are high.