Diabetic nephropathy is one of the major complications of insulin-dependent diabetes mellitus (IDDM), with proteinuria being the main clinical manifestation of diabetic nephropathy. Most patients who develop overt proteinuria progress to end-stage renal disease (ESRD), usually within 5 to 7 years; ESRD necessitates dialysis or renal transplantation. Although a relationship between blood pressure reduction and delaying of ESRD has been assumed for a long time, only recently has a controlled randomised clinical trial shown that the treatment of diabetic nephropathy with an ACE inhibitor can significantly delay the loss of renal function and, therefore, ESRD. Consistent with the clinical trial on which this economic evaluation was based, the costs and consequences of 2 alternatives were considered: (i) patients subject to blood pressure control with only antihypertensive medication, but without an ACE inhibitor (placebo group) and (ii) patients given ACE inhibitor therapy (captopril group) with similar blood pressure control to the placebo group. This cost-effectiveness analysis was performed from the perspective of the Italian National Health Service [Servizio Sanitario Nazionale (SSN)]. Accordingly, only direct costs related to publicly funded healthcare services were included. The number of dialysis-years avoided (DYA) was the clinical end-point. A 10-year time horizon was considered for the economic evaluation. Captopril therapy was dominant, being at the same time more effective and less costly. The total cost for the captopril alternative during the 10-year period was 21,901,625 Italian lire (L; 1993 values) per patient, while total cost for the placebo alternative was L30,352,590 per patient. Compared with placebo, 20.01 DYA per 100 patients treated were estimated with captopril therapy during the trial period, equivalent to 2.4 months per patient. The robustness of this result was confirmed by sensitivity analysis: for both extremes, captopril remained dominant. This economic evaluation, requested by the Italian Ministry of Health, demonstrated savings in healthcare expenditure with the use of an ACE inhibitor in patients with proteinuria.