In Portugal (population 10 million), 12% of the adult population is obese (BMI ? 30) and almost 50% are overweight (BMI ? 25). These persons have an increased risk of morbidity and premature death due to various diseases (eg. type II diabetes, hypertension, coronary heart disease and some forms of cancer). OBJECTIVES: To calculate the direct economic cost of illness associated with obesity in Portugal. METHODS: A prevalence-based COI approach is adopted. Data are drawn from the National Health Survey, the hospital information system (based on DRG's) and IMS-Portugal. The main cost categories included are hospitalization, ambulatory care and pharmaceuticals. Obesity population attributable fraction (PAF) are calculated for ten co-morbidities. Relative risks are drawn from large-scale prospective international studies and prevalence data from national sources. RESULTS: The direct cost of obesity in Portugal in 1996 was estimated as PTE 46.2 billion. This corresponds to 3.5% of annual health care expenditure, a share larger than in 5 of the six countries where comparable studies have been carried out (the exception being the U.S.). The largest cost component is expenditure on pharmaceuticals (43%), followed by hospitalization (29%) and ambulatory care (28%). Drug costs are attributable largely to circulatory system pathologies, particularly hypertensive diseases. Annually. more than 35,000 inpatient episodes are attributable to obesity and the problem is responsible for over 2 million doctor visits. CONCLUSIONS: A considerable proportion of portuguese health spending is used in treating obesity co-morbidities. Preventive and therapeutic strategies that reduce obesity prevalence can potentially bring about significant cost-savings. More research is needed on the benefits and cost-effectiveness of strategies aimed at reducing obesity.