OBJECTIVES: The objective of the present study was to estimate annual costs of care incurred by Swedish patients with type 2 diabetes between 2000 and 2004 and to determine the drivers of costs using data from the RECAP-DM study, which included medical records on 11,856 patients with type 2 diabetes retrospectively identified in computerised registers at 26 primary care centres in Uppsala county (°Ö300,000 inhabitants). METHODS: Costs of outpatient care, drugs and devices were estimated by assigning unit costs from published sources to care-giver contacts and prescriptions recorded in computerised primary care records. Costs of inpatient care were estimated by classifying hospitalisations of study patients into diagnosis-related groups (DRGs) according to the Nord-DRG classification system and assigning average costs per DRG. Costs of dialysis were estimated using data from the Swedish Register for Active Care of Renal Failure. Drivers of costs were analysed through multiple regression analysis. RESULTS: The average annual cost of care over the studied years was $2658 per patient (n=7269 on average). Costs of inpatient care accounted for an average 59% of total costs. Results of the regression analysis indicated that the main driver of costs was the presence of complications. Undergoing treatment for renal failure in a given year was associated with a $70,682 increase in total costs of care during the year. Experiencing a major cardiovascular event (acute MI, stroke, PCI or CABG) in a given year was associated with a $15,094 increase in total costs of care during the year. CONCLUSION: Diabetes continues to impose a heavy economic burden on society. Cost estimates from this population-based sample of Swedish type 2 diabetics may serve as reference values for a Swedish setting and provide additional information on the composition of costs.