OBJECTIVES: The primary objective of the DiabCost study was to determine the cost of Type 2 diabetes in Australia. Additional objectives were to collect data on quality of life, health service use and indirect costs for people with Type-2 diabetes, and to improve understanding of the burden on careers. METHODS: A paper-based questionnaire was used to collect cross-sectional survey data. Approximately 25,000 questionnaires were mailed to people from a national diabetes database and responses were received from 10,652 people. Respondents were asked to self-report three months’ retrospective data. Questions covered demographic information, health status (including history of microvascular and macrovascular complications), health service utilization, cost to people with diabetes, lost productivity and quality of life (using the EQ-5D instrument). A separate questionnaire filled in by careers covered carer burden. Costs were derived from numerous public sources such as government reimbursement schedules, hospital cost reports, drug price lists and government pension rates. RESULTS: The mean annual cost per individual with Type-2 diabetes was a$7565. These comprised direct costs of AUS$5325 (including AUS$4261 in health care and AUS$1064 in non health care costs), self-reported indirect costs of AUS$94 (comprising AUS$32 in lost patient wages and AUS$62 in lost carer wages) and AUS$2146 in career costs. The overall cost of Type-2 diabetes in Australia is predicted to be AUS$3.1 billion. CONCLUSIONS: Type-2 diabetes impacts significantly on affected individuals and their careers. It also has a significant impact on Australia’s health care expenditure.