OBJECTIVE To evaluat e the cost-effectiveness of Keluoxin capsule combi ned with chemical medicine in the treatment of diabetic kidney disease （DKD）from the perspective of the whole society. METHODS Six-state Markov model with 1 year cycle and 40 years time horizon was constructed by means of secondary literature review ，medical record analysis of sample hospital and clinical expert consultation. The cost-effectiveness of Keluoxin capsule combined with chemical medicine versus chemical medicine alone for DKD was evaluated by taking the quality-adjusted life year （QALY）as the output index ，setting the discount rate as 5％，and taking one time domestic gross domestic product （GDP）per capita in 2020 of China as the judgement threshold of incremental cost-effectiveness ratio （ICER）. RESULTS Within 40 years，Keluoxin capsule combined with chemical medicine group spent 8 644.09 yuan per capita more than chemical medicine alone group ，and gained more 0.143 QALYs；ICER was 60 460.25 yuan/QALY，which was less than one times GDP per capita of China in 2020（72 447 yuan）. The results of sensitivity analysis showed that the annual days of using Keluoxin capsule ，the health utility value of DKD at early stage had a great influence on the results of cost-effectiveness analysis. The results of probabilistic sensitivity analysis suggested that the basic analysis results of this study were robust. CONCLUSIONS At the current price level ，Keluoxin capsule combined with chemical medicine is more cost-effective to treat DKD than chemical medicine alone. The dosage of Keluoxin capsule and health utility value should be paid attention in specific decision- bjmu.edu.cn making scenarios.