To examine the direct and indirect costs of rheumatoid arthritis (RA) during the first year of disease. As part of a longitudinal observational study, 150 patients with seropositive RA of 5.9 +/- 2.9 mo duration were recruited through the Western Consortium of Practicing Rheumatologists. Subjects completed questionnaires about health care services and resources utilized and about the number of days of usual activity lost as a result of RA during the 6 month period prior to enrolment. Study participants had active RA as evidenced by mean tender and swollen joint counts of 24.9 +/- 13.5 and 20.6 +/- 11.6, respectively, and moderate functional impairment reflected by a mean Health Assessment Questionnaire (HAQ) score of 1.24 +/- 0.7. The average total direct cost of RA was $200/month. Health care visits, medications, and radiographs accounted for 78% of the total direct cost, while expenditures for hospitalizations accounted for only 3.5% of the total. The average number of days of usual activity lost per month because of RA was 3.8 +/- 7.7, translating into an average indirect cost of $281/month. Of the 95 subjects who were gainfully employed prior to disease onset, 12 were disabled and 5 were on sick leave as a result of RA, corresponding to a work disability rate of 18%. Work disabled subjects reported significantly lower total household incomes and higher HAQ disability and global disease activity scores than subjects who continued working. In this group of patients with seropositive RA substantial costs, both direct and indirect, were incurred during the first year of disease.