We assessed the cost-effectiveness of prescribing angiotensin-converting enzyme (ACE) inhibitors to delay progression of diabetic nephropathy in normotensive patients with type II diabetes and microalbuminuria. The Markov models determined by DATATreeAGE software were used to calculate the lifetime medical costs and life expectancy in patients treated with or without ACE inhibitors. The incremental cost-effectiveness ratio (ICER), defined as the change in medical costs divided by the change in life expectancy, was the main outcome parameter. The ICER for ACE inhibitor therapy was US$788.37 per life-year saved. Sensitivity analysis showed that ACE inhibitor therapy had no cost-effectiveness value when the cost of ACE inhibitors was increased for more than 90% or when the cost of haemodialysis was decreased for greater than 48%, or when the efficacy of the treatment was reduced until the cumulative incidence of macroalbuminuria was increased from 18 to 48%.