To determine the direct and indirect cost of osteoarthritis (OA) according to disease severity, and to estimate the total cost of the disease in Hong Kong. This study is a retrospective, cross-sectional, nonrandom, cohort design, with subjects stratified according to disease severity based on functional limitation and the presence or absence of joint prosthesis. Subjects were recruited from primary care, geriatric medicine, rheumatology, and orthopedic clinics. There were 219 patients in the mild disease category, 290 patients in the severe category, and 65 patients with joint replacement. A questionnaire gathered information on demographic and socioeconomic characteristics, function limitation, use of health and social services, and effect on occupation and living arrangements over the previous 12 months. Costs were calculated as direct and indirect. Low education and socioeconomic class were associated with more severe disease. OA affected family or close relationships in 44%. The average cost incurred as a result of side effects of medication is similar to the average cost of medication itself. Excluding joint replacement, the direct costs ranged from Hong Kong (HK) dollar $11,690 to $40,180 per person per year and indirect costs, HK $3,300-$6,640. The direct costs are comparable to those reported in Western countries; however, the ratio of direct to indirect costs is much higher than 1, in contrast to the greater indirect versus direct costs reported in whites. The total cost expressed as a percentage of gross national product is also much lower in Hong Kong. The socioeconomic impact of OA in the Hong Kong population is comparable to Western countries, but the economic burden is largely placed on the government, with patients having relatively low out-of-pocket expenditures.