The purpose of this study was to evaluate the relationships between diabetes and medical and dental care costs from a 5-yr prospective observation of Japanese workers. The data were derived from health and dental examinations and health insurance claims of 4,086 workers aged 40-54 yr. At baseline, the subjects were assigned to four categories: known diabetes; undiagnosed diabetes; impaired fasting glucose (IFG); and non-diabetic. The differences in health care costs among the non-diabetics, IFG and undiagnosed diabetes groups were not seen at baseline, but the costs incurred by the subjects with undiagnosed diabetes substantially increased thereafter. Over 5 yr of the study period, compared with the non-diabetic group, subjects with known diabetes incurred 3.9- and 2.9-fold higher annual inpatient and outpatient costs, respectively, while subjects in the undiagnosed diabetes group incurred 3.0- and 1.6-fold higher costs, respectively. There were no significant associations between annual dental care costs and diabetic status. The excess costs of medical care among subjects with diabetes were attributable to diabetes itself, heart disease and cerebrovascular disease, but not cancer. Among middle-aged workers, diabetics incurred significantly greater medical care costs than non-diabetics, whereas IFG was not associated with higher costs.