ABSTRACT.This study estimates the economic cost of diabetes mellitus in Sweden 1978. It also addresses the question of potential savings from improved metabolic control. Economic costs of illness include direct costs for medical care and indirect costs from lost production due to morbidity and premature death. The total costs of diabetes are estimated at 1300 million SEK in Sweden 1978. The direct costs for medical care accounted for 43% of these costs. Lost production due to permanent disability is the dominating indirect costs, and accounts for 60% of indirect costs and one third of the total costs. Institutional care accounts for two thirds of the direct costs. The costs for drugs and medical devices amount to 128 million SEK or 1000 SEK per insulin‐ or oraldependent diabetic. Costs for control of diabetes are estimated to 20% of the total cost and 50% of direct costs. The conclusion is that there are great potential benefits to be expected from improved self control of diabete