BACKGROUND Atopic dermatitis (AD) is a common dermatologic condition with a prevalence varying from 5% to 15%, and it has been rising over time. Several studies from developed countries have revealed the substantial economic burden of AD on health care budgets. There has been no research however on the cost of care of AD from India a country where health care is self-funded with no health insurance or social security provided by the government. OBJECTIVE The aim of our study was to assess prospectively the cost of care of AD in children in an outpatient hospital setting in India. METHODS A total of 40 children with AD, <10 years of age, registered in the pediatric dermatology clinic at our institute were enrolled for the study. All patients were followed-up for 6 months. Demographic information, clinical profile, severity, and the extent of AD were recorded in predesigned performa. Caregivers were asked to fill up a cost assessment questionnaire specially designed for the study. It had a provision for measuring direct, indirect, and provider costs. RESULTS Of the 40 patients, 37 completed the study. Mean total cost for AD was Rs. 6235.00 ± 3514.00. Direct caregiver cost was Rs. 3022.00 ± 1620.00 of which treatment cost constituted 77.2 ± 11.1%. The total provider cost (cost of consultation, nursing/paramedical staff and infrastructure was Rs. 948.00, which was 15.2% of the total cost of care and the mean indirect cost calculated by adding loss of earnings of parents due to hospital visits was Rs. 2264.00 ± 2392.00 (range: 0-13,332). The mean total cost depending on the severity of AD was Rs. 3579.00 ± 948.00, Rs. 6806.00 ± 3676.00 and Rs. 8991.00 ± 3129.00 for mild, moderate and severe disease, respectively. CONCLUSIONS AD causes a considerable drain on the financial resources of families in India since the treatment is mostly self-funded. Cost of care of AD is high and comparable to those of chronic physical illness, such as diabetes mellitus, and this cost is higher in severely ill-patients. This study is an attempt to highlight the cost of care of AD and the need for conducting more studies to sensitize the government and insurance agencies to economic aspects of AD.