This study estimated the economic efficiency (1) of intensive blood glucose control and tight blood pressure control in patients with type 2 diabetes who also had hypertension, and (2) of metformin therapy in type 2 diabetic patients who were overweight. We conducted cost-utility analysis based on patient-level data from a randomised clinical controlled trial involving 4,209 patients with newly diagnosed type 2 diabetes conducted in 23 hospital-based clinics in England, Scotland and Northern Ireland as part of the UK Prospective Diabetes Study (UKPDS). Three different policies were evaluated: intensive blood glucose control with sulphonylurea/insulin; intensive blood glucose control with metformin for overweight patients; and tight blood pressure control of hypertensive patients. Incremental cost : effectiveness ratios were calculated based on the net cost of healthcare resources associated with these policies and on effectiveness in terms of quality-adjusted life years gained, estimated over a lifetime from within-trial effects using the UKPDS Outcomes Model. The incremental cost per quality-adjusted life years gained (in year 2004 UK prices) for intensive blood glucose control was 6,028 UK pounds, and for blood pressure control was 369 UK pounds. Metformin therapy was cost-saving and increased quality-adjusted life expectancy. Each of the three policies evaluated has a lower cost per quality-adjusted life year gained than that of many other accepted uses of healthcare resources. The results provide an economic rationale for ensuring that care of patients with type 2 diabetes corresponds at least to the levels of these interventions.