Introduction: Alzheimers disease (AD) is one of the most important causes of morbidity and functional decline among the elderly and gives rise to substantial costs for society. There is today limited data on resource utilization and quality of life in AD, in particular in the severe stage of the disease. Aims & Methods: The objectives of this study were to estimate the relationship between costs, patient and caregiver quality of life, and disease severity. For 233 patients in Sweden and their caregivers cross-sectional data on cognitive function (MMSE), ADL ability, behavioral disturbances, formal and informal resource use and health related quality of life (HRQoL) were collected by questionnaires to caregivers and to the treating physician. Patients were stratified into the disease stages mild, moderate and severe AD based on MMSE-scores. Results: The mean annual total cost in 2007 USD was 23,400 in mild, 56,800 in moderate and 71,400 in severe AD. Special forms of accommodation accounted for the majority of costs. Costs were higher for patients with lower cognitive function, lower ADL ability and more behavioral disturbances, with ADL ability being the most consistent predictor of costs. There were significant differences in HRQoL between the disease stages: health utility scores were 0.64 in mild, 0.39 in moderate and 0.24 in severe AD. Conclusions: The societal costs of AD are very high, especially for patients with moderate and severe AD. This implies that treatments with the ability to delay progression of the disease into more severe stages have the potential to save large costs for society.