OBJECTIVES: Obesity is a very common condition in type 2 diabetic patients. Treating obesity may enhance hypoglycemic treatment and, thus, may contribute to a reduction in long-term microvascular and macrovascular complications. Orlistat, a drug for achieving and maintaining weight loss, reduces cardiovascular risk factors in randomised clinical trials. The objectives of this study were to estimate the resulting long-term clinical consequences and cost-effectiveness of treating obese type 2 diabetic patients with orlistat. METHODS: A Markov model was developed to predict, over a 10-year period, the complication rates and mortality with and without a two-year orlistat treatment, assuming a five-year weight catch-up period after treatment according to epidemiological evidence. A stepwise approach was used to apply published clinical data into prediction of long term outcome. As a first step, the impact of orlistat on HbA1c, blood pressure and cholesterol was obtained. In a second step, the impact of decreasing these risk factors on mortality and micro- and macrovascular complications was obtained. Four subgroups, defined by the presence of arterial hypertension and/or hypercholesterolemia, were studied. RESULTS: Cost-effectiveness varies between 3,462 Euro/life year gained (LYG) for obese diabetic patients with hypertension and hypercholesterolemia, and 19,986 Euro/LYG for obese diabetic patients without other risk factors. Sensitivity analyses on all relevant variables indicate that these results are very robust. CONCLUSIONS: Our results suggest that orlistat is cost-effective in the management of obese type 2 diabetic patients, especially in those with concomitant hypercholesterolemia and/or hypertension.