The objective was to estimate the economic costs of diagnosed type 1 (T1DM) and type 2 (T2DM) diabetes mellitus in the United States in 2007. Medical claims were analyzed to estimate the proportion of diagnosed diabetes cases and excess medical costs by diabetes type. Indirect costs associated with T1DM and T2DM were estimated by using findings from the literature on diagnosed diabetes, as well as differences in health per case of T1DM and T2DM. This study builds on the Cost of Diabetes Model developed for the American Diabetes Association to estimate the economic burden of diagnosed diabetes. T1DM accounts for an estimated 5.7% (1.0 million) of the 17.5 million people with diagnosed diabetes. Approximately $14.9 billion (8.6%) of the economic burden of diagnosed diabetes is associated with T1DM, including medical costs of $10.5 billion and indirect costs of $4.4 billion. Costs associated with T2DM are $159.5 billion, including medical costs of $105.7 billion and indirect costs of $53.8 billion. The economic burden per case of diabetes is greater for T1DM than for T2DM, and the difference increases with age. The prevalence of T2DM is significantly greater than the prevalence of T1DM, so T2DM is responsible for most of the economic burden of diabetes. Estimates for T1DM are sensitive to the criteria used to identify people with diabetes using claims data; estimates for T2DM are relatively stable. Improved coding of diabetes type in medical claims and identification of diabetes type in survey data could lead to more precise estimates of the economic burden by diabetes type.