Objective: To assess the short-term direct medical costs and effectiveness associated with achieving recommended glycaemic goals using commonly prescribed first-line oral antihyperglycaemic medications in type 2 diabetes mellitus. Materials and Methods: A literature-based, decision-tree model was developed to project the number of patients achieving glycosylated haemoglobin values of <7% on oral therapies and the associated costs over a 3-year timeframe. For each first-line strategy, patients could progress to combination therapy using two or more. agents prior to the introduction of insulin. The overall cost of treatment included costs (2001/2002 values; $US) of comprehensive medical care, laboratory tests, patient education, drug therapy, home glucose monitoring and adverse events. Results: At 3 years, the overall cost of treatment for the various first-line strategies was $US6106 for glipizide gastrointestinal therapeutic system, $US6727 for metformin immediate release, $US,6826 for metformin extended release, $US7141 for glibenclamide (glyburide)/metformin, $US7759 for rosiglitazone and $US9298 for repaglinide. Costs of comprehensive routine medical care ranged from approximately $US1538-2128 in year 1 and from approximately $US952-1543 in subsequent years, for controlled and uncontrolled patients, respectively. Adverse events represented <1%, and drug therapies represented approximately 50%, of the overall cost, respectively. Substantial cost differences between the strategies were seen within the first year. Regardless of first-line therapy, patients progressed quickly to combination therapies, with effectiveness among the agents being similar. Conclusions: Short-term costs required to provide comprehensive diabetes care and achieve glycemic goals can be substantial. The model suggests a sulphonylurea strategy may provide similar effectiveness with cost savings over other agents and should be considered when selecting an initial drug therapy in newly diagnosed patients with type 2 diabetes mellitus.