The impact of atrial fibrillation (AF) on mortality, stroke, and medical costs is unknown. We conducted a prospective cohort study of hospitalized Medicare patients with AF and 1 other cardiovascular diagnosis (CVD) compared with a matched group without AF (n = 26,753), randomly selected in 6 age-sex strata from 1989 MedPAR files of more than 1 million patients diagnosed as having AF. Stroke rates were also determined in another cohort free of CVD (n = 14,267). Total medical costs after hospitalization were available from a 1991 cohort. Cumulative mortality, stroke rates, and costs following index admission were adjusted by multivariate and proportional hazard regression analyses. Mortality rates were high in individuals with CVD, ranging from 19.0% to 52.1% in 1 year. Adjusted relative mortality risk was approximately 20% higher in patients with AF in all age-sex strata during each of the 3 years studied (P < .05). Incidence of stroke was high in individuals with CVD, 6.2% to 15.4% in 1 year, with and without AF, and was at least 5-fold higher than in individuals without CVD. In those with CVD, stroke rates were approximately 25% higher in women with AF (P < .05) but only 10% higher in men. Adjusted total Medicare spending in 1 year was 8.6- to 22.6-fold greater in men, and 9.8- to 11.2-fold greater in women with AF (P < .05). Second- and third-year costs were increased as well. Prevention of AF and treatment of patients with AF and associated CVD may yield benefits in reduced mortality and stroke as well as reducing health care costs.