OBJECTIVE Although the number of elders with diabetes has increased dramatically, there are few data on rates of mortality and serious complications in older populations with diabetes. To determine such rates, we conducted a population-based, nonconcurrent cohort study using claims data from the 1994-1996 Medicare 5% Standard Analytical File. RESEARCH DESIGN AND METHODS Codes from the ICD-9 were used to identify diabetes and the following complications: amputation, lower extremity infection, gangrene, blindness, acute myocardial infarction, ischemic heart disease, stroke, and metabolic disorders. Using these codes, we assembled a cohort of 148,562 Medicare Part A and B beneficiaries who were > or = 65 years of age, who were alive on 1 January 1995, who were not in managed care in 1994, and who had a diabetes-related claim in 1994. Age-specific rates of death and complications were then calculated. RESULTS During 24 months of follow-up, 22,044 (14.8%) elders with diabetes died. Death rates in men and women increased significantly with age. Compared with their counterparts in the general U.S. population, elders with diabetes suffered excess mortality at every age group, corresponding to an overall standardized mortality ratio of 1.41 (95% CI 1.39,1.43). The incidence of ischemic heart disease and stroke was 181.5 and 126.2 per 1,000 person-years, respectively, which was higher than the incidence of all other diabetes-related complications. CONCLUSIONS In every age group, elders with diabetes have significantly higher all-cause mortality rates than the general population. Medicare data may be useful in monitoring trends in diabetes-related morbidity and total mortality in U.S. elders with diabetes.