This study extends nutritional intervention results reported by short-term clinical trials of a diabetes-specific nutritional meal replacement by assessing the ten-year impact of the interventions on patient outcomes and costs compared to usual care. We developed and validated a computer simulation of type 2 diabetes based on published data from major clinical trials. The model tracks patients through microvascular and macrovascular health states and reports cumulative costs and quality adjusted life years. We modeled different scenarios that include a diabetes-specific nutritional meal replacement as part of a structured lifestyle intervention, and also as the only difference between the intervention and usual care treatment groups, and compared them to usual care with diet and physical activity recommendations. We used sensitivity analysis to explore the robustness of results. When a diabetes-specific nutritional meal replacement is the only treatment difference and is considered an equal cost meal replacement, the diabetes-specific nutritional meal replacement interventions are less costly and more effective than usual care. As an added cost meal replacement, the diabetes-specific nutritional meal replacement has an incremental cost-effectiveness ratio between $50,414 and $55,036 depending on improvement in percent glycated hemoglobin. A hypothetical lifestyle intervention using a diabetes-specific nutritional meal replacement has an incremental cost-effectiveness ratio of $47,917. The diabetes-specific nutritional meal replacement was found to be cost-effective under the various conditions simulated.