OBJECTIVES: Stroke is the third leading cause of death and a leading cause of disability. We determined incidence, and total direct costs of stroke by stroke type, age group, gender and race. METHODS: We used an incidence approach and aggregate national data sources to determine 1998 US direct medical cost of stroke from a societal perspective. We modeled the disease from first hospitalization to end of first year. A sensitivity analysis varied prevalence and utilization of each cost factor around a base case. RESULTS: The incidence of first stroke is 232/100,000 population of which 82% are ischemic strokes. The total annual costs of a first time stroke are $25.2 billion. The first hospitalization accounts for 20% of costs but all hospitalizations together in the first year account for the highest proportion of costs (65%, $15.9 billion). Those with subarachnoid hemorrhagic stroke ($18,461) had first hospitalization costs per stay more than three times higher than ischemic stroke ($5,417) and more than two times higher than intracerebral hemorrhagic stroke ($7,709). Also high are costs for chronic disability care, which are $5.5 billion, primarily home care ($3.9 billion). Sensitivity analysis showed a maximum variation in cost from $15.8 to $35.8 billion when varying incidence estimates. CONCLUSION: The societal cost burden is quite high and caused primarily by disability factors. Although ischemic stroke accounts for the highest total costs due to its higher incidence, subarachnoid hemorrhagic stroke accounts for more deaths and much higher first hospitalization costs. This study demonstrates a high combined acute and chronic care burden for stroke patients.