OBJECTIVES: This study aimed to quantify the annual cost of type 2 diabetes mellitus (T2DM) in Mexico and explore the relative contributions of different components of cost. METHODS: A cost of illness model was developed in Microsoft Excel 2007 to estimate the economic burden of T2DM in Mexico 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.  Primary research approaching local key opinion leaders was performed to fill data gaps.  Sensitivity analyses were conducted to identify data inputs which were most likely to impact overall results when varied. Costs are presented in Mexican pesos 2012. RESULTS: The annual cost of T2DM in Mexico is estimated to be $107,343,890,388MXN($ 8,643,348,612USD). This figure represents ~13% of the national healthcare expenditure. The cost of complications were estimated to account for 91% of the total cost of T2DM, with cardiovascular and eye complications accounting for 49% and 18% of total costs, respectively. Routine management, including drug costs, was estimated to comprise 9% of total cost of T2DM. The cost estimate was most sensitive to incidence and event cost of peripheral vascular disease, stroke and severe vision loss. CONCLUSIONS: Based on the present analysis, T2DM places a significant financial burden on the healthcare system in Mexico, with cost of treating related complications being the main cost driver.  Given the model focuses on diagnosed and treated T2DM patients, it is likely this cost is even higher when undiagnosed and untreated patients are considered. Delaying the onset of complications could result in a reduction in costs, as well as benefits for the patient and healthcare system.