This paper presents a methodology for estimating the burden of diseases in monetary terms instead of a demographic indicator. The purpose was to ascertain the financial burden arising out of various categories of morbidity in the community. The disease-wise burden would act as a pointer for the policy maker to assign pirority while allocating resources to different programmes within the health sector budget. The empirical study was carried out by CMDR, Dharwad under the sponsorship of IDRC, Canada, in four selected districts, viz. Belgaum, Bijapur, Dharwad and Dakshina Kannada of Karnataka with a sample size of 2039 households and 1156 patients.