OBJECTIVES: To compare top down and bottom up cost estimates of direct health-care costs for diabetes type 2 in the Netherlands. METHODS: For the top down cost estimates we used comprehensive Dutch national age and sex-specific cost of illness estimates for diabetes and diseases related to diabetes complications. Costs for diabetes type 2 were separated by age (age 35 and older) and by prevalence rates for types 1 and 2. The costs of complications were estimated using costs and prevalence rates for cardiovascular diseases, neuropathy, nephropathy and retinopathy, combined with relative risks for these complications in patients with diabetes type 2. The bottom up costs were estimated using a sample of 1371 type 2 diabetes patients for whom their GP reported the total medical consumption related to diabetes and its complications during the previous six months. RESULTS: Total medical costs for diabetes type 2 in 1998 were Euro 567 mln according to the bottom up estimate versus Euro 519 mln for the top down estimate, or less than 10 % difference in cost. The costs for in hospital care, ambulatory care and equipment were very comparable. The cost of medication was higher according to the bottom up study. The bottom up study identified a larger amount of cardiovascular and lipid lowering drugs. Both costing methods show that complications, especially cardiovascular, are responsible for a substantial portion of total health-care costs. CONCLUSIONS: For diabetes type 2 it was demonstrated that using comprehensive top down disease costs combined with sound epidemiological data on complications, can yield valid cost estimates that are quite comparable with bottom up cost estimates.