This study estimates the direct health and social care costs of insulin-dependent diabetes mellitus (IDDM) in England and Wales in 1992 to be 96 million pounds, or 1021 pounds per person in a population with IDDM estimated at 94,000 individuals. These costs include insulin maintenance, hospitalization, GP and out-patient consultations, renal replacement therapy, and payments to informal carers. Expenditure is concentrated on younger age groups, with one-third of the total expended on those aged 0-24. Around one-half of the total costs can be directly attributed to IDDM, with the remainder associated with a range of complications of the disease. The single largest area of service expenditure is renal replacement therapy. The cost estimates are most sensitive to incidence rates of IDDM, numbers on dialysis and average duration of dialysis. A further 113 million pounds may be lost each year due to premature deaths resulting in lost productive contributions to the economy. The direct and indirect costs of IDDM are therefore significant. The cost of illness framework presented here should facilitate the economic evaluation of new and existing treatment regimens, which may improve value for money by reducing costs and/or increasing the quality or quantity of life for people with IDDM.