OBJECTIVE To develop a model isolating the annual per-student cost of, and the fund sources for, educating undergraduate medical students at the Virginia Commonwealth University Medical College of Virginia School of Medicine. METHODS For 1994-95, hours that faculty spent in direct scheduled contact with students and time that students spent in direct scheduled contact with faculty were inventoried. Student, faculty, and resident contact hours for clinical clerkships and electives were estimated. Faculty contact hours and average faculty workload profiles were used to compute the number of full-time-equivalent faculty positions required to deliver the undergraduate medical curriculum. Support staff and operating budget requirements were based on the number of required faculty, and actual salary averages were used to compute faculty and staff costs. Other institutional costs that indirectly support undergraduate medical education were estimated. Using faculty contact hours and actual cost data, fund sources that support undergraduate medical education were identified. RESULTS Medical school faculty spent more than 89,000 scheduled hours teaching 674 undergraduate medical students. The faculty-student ratio was 1:3.35. Residents spent nearly 79,000 hours training undergraduate medical students. The total annual cost of undergraduate medical education was $69,992 per student. State funds contributed less than a third of the required financial resources; faculty clinical practice funds provided nearly half. CONCLUSIONS Although there are inherent complexities, isolating the cost and fund sources of undergraduate medical education is an essential first step toward providing categorical funding. The model developed during the study provides a basis for assigning costs, allocating resources among instructional programs, and predicting incremental costs (or savings) and revenue requirements. The model may be of use to other medical schools contemplating new strategies for financing undergraduate medical education.