Back ground: Diabetes mellitus is a chronic lifelong disease, requiring long term expensive treatment. Costly treatment is a limiting factor to medical adherence and therefore imposes a substantial economic burden on the society. In a developing country like India, it is important to make the treatment affordable to everyone irrespective of their socio-economic status. Cost effectiveness analysis is a pharmacoeconomic tool used to identify the treatment that represents the best outcome for the rupee spent. Objectives: To assess and compare cost effectiveness of metformin plus voglibose plus glimepiride and metformin plus voglibose plus gliclazide. Methodology: A prospective observational randomised comparative study was conducted for a period of six months across 2 diabetes centres. Out patients who consented to participate in the study were asked questions relevant to the study. The data collected were recorded in a data collection form and follow up was conducted after 3 months. The data was subjected to descriptive analysis using two independent sample t-test. With the results, cost effectiveness analysis was performed using ACER. Results: Out of 109 patients, 58 (53%) were on glimepiride plus metformin plus voglibose therapy (group 1) and 51 (47%) were on gliclazide plus metformin plus voglibose (group 2). In group 1 the mean cost for reducing unit HBA1C was found to be 322.9, mean cost for reducing unit FBS was 73.12 and the mean cost for reducing unit PPBS was 5.24. In group 2, the mean cost for reducing unit HBA1C was 480.5, the mean cost for reducing FBS was 35.16 and the mean cost for reducing unit PPBS was 94.90. Conclusion: Cost effectiveness analysis showed that the mean cost for reducing unit HBA1C and PPBS in glimepiride plus metformin plus voglibose group was less than that in the gliclazide plus metformin plus voglibose group. Whereas reduction in FBS was significantly less in the latter compared to the former. Key words: Cost effectiveness, gliclazide, glimepiride, diabetes mellitus.