There are substantial healthcare costs associated with the provision of renal replacement therapy. Patients with diabetes mellitus are the largest and fastest growing group developing end-stage renal disease (ESRD) in the United Kingdom (UK). Treatment leading to a slowing of progression to ESRD in diabetic patients could lead to considerable cost savings. Using treatment-specific probabilities derived from the Irbesartan in Diabetic Nephropathy Trial (IDNT), the cost effectiveness of treating patients with hypertension, type II diabetes and nephropathy with irbesartan, amlodipine or control was calculated using a Markov model. UK-specific ESRD-related data were retrieved from published sources to reflect local management practices, ESRD outcomes and costs. Mean 10-year costs and changes in life expectancy due to ESRD delayed or avoided were calculated. Future costs and clinical benefits were discounted at 6.0 and 1.5% per annum and extensive sensitivity analyses were performed. Delay in the onset of ESRD with irbesartan led to cost savings of pound sterling 5125 and pound sterling 2919/patient and improvements in projected discounted life expectancy of 0.07 and 0.21 years over 10 years vs amlodipine and control, respectively. The costs of treatment of ESRD were the main contributor to the total costs. The cost of trial medications had only a minor impact. These results were robust in a wide range of plausible assumptions. Given that the IDNT efficacy results could be translated to a UK setting, treating patients with hypertension, type II diabetes and overt nephropathy with irbesartan was cost saving over a 10-year period compared to amlodipine and control.