OBJECTIVES: This study aimed to quantify the annual financial cost of type 2 diabetes (T2DM) in Brazil and explore the relative contribution of different components of cost. METHODS: A cost of illness model was developed in Microsoft Excel 2007 to estimate the financial cost of T2DM in Brazil from the public healthcare payer perspective. Cost of routine management and complications were included in the analysis. Data inputs for prevalence of T2DM (weighted to include only patients who are diagnosed and treated) and related complications, costs and routine management were sourced from the published literature and publicly available databases, where available.  Key opinion leader input was sought to fill data gaps.  Sensitivity analyses were conducted to identify parameters which were most likely to impact overall results when varied. Costs are presented in Brazilian Reals 2012. RESULTS: The annual cost of T2DM in Brazil is estimated to be 11,275,921,167 BRL ($5,471,123,022USD) which represents 5.3% of national healthcare expenditure.  Costs of complications were estimated to account for 56% of the total cost of T2DM. Cardiovascular complications accounted for 32% of total T2DM cost.  Diabetes drug costs were estimated to account for 31% of total T2DM healthcare spending.  The overall cost estimate was most sensitive to the laser eye surgery, hemodialysis and cardiovascular complications and the frequency and cost of routine physician consultations. CONCLUSIONS: The findings indicate that there is a high economic burden of T2DM for the Brazilian healthcare system.  Cost of treating related complications was the main driver. An even higher burden of the disease is expected if undiagnosed and patients currently not being treated start receiving public medical attention.  The burden of the disease could considerably be reduced if T2DM related complications were avoided, which not only benefits the health care system but the patients as well.