OBJECTIVE: To assess the cost-effectiveness of intensive versus conventional therapy for 8 years as applied in the Steno-2 study in patients with type 2 diabetes and microalbuminuria. RESEARCH DESIGN AND METHODS: A Markov model was developed to incorporate event and risk data from Steno-2 and account Danish-specific costs to project life expectancy, quality-adjusted life expectancy (QALE), and lifetime direct medical costs expressed in year 2005 Euros. Clinical and cost outcomes were projected over patient lifetimes and discounted at 3% annually. Sensitivity analyses were performed. RESULTS: Intensive treatment was associated with increased life expectancy, QALE, and lifetime costs compared with conventional treatment. Mean +/- SD undiscounted life expectancy was 18.1 +/- 7.9 years with intensive treatment and 16.2 +/- 7.3 years with conventional treatment (difference 1.9 years). Discounted life expectancy was 13.4 +/- 4.8 years with intensive treatment and 12.4 +/- 4.5 years with conventional treatment. Lifetime costs (discounted) for intensive and conventional treatment were euro45,521 +/- 19,697 and euro41,319 +/- 27,500, respectively (difference euro4,202). Increased costs with intensive treatment were due to increased pharmacy and consultation costs. Discounted QALE was 1.66 quality-adjusted life-years (QALYs) higher for intensive (10.2 +/- 3.6 QALYs) versus conventional (8.6 +/- 2.7 QALYs) treatment, resulting in an incremental cost-effectiveness ratio of euro2,538 per QALY gained. This is considered a conservative estimate because accounting prescription of generic drugs and capturing indirect costs would further favor intensified therapy. CONCLUSIONS: From a health care payer perspective in Denmark, intensive therapy was more cost-effective than conventional treatment. Assuming that patients in both arms were treated in a primary care setting, intensive therapy became dominant (cost- and lifesaving).