Diabetes causes significant disabilities, reduced quality of life and mortality that imposes huge economic burden on societies and governments worldwide. Malaysia suffers a high diabetes burden in Asia, but the magnitude of healthcare expenditures documented to aid national health policy decision-making is limited. This systematic review aimed to document the economic burden of diabetes in Malaysia, and identify the factors associated with cost burden and the methods used to evaluate costs. Studies conducted between 2000 and 2019 were retrieved using three international databases (PubMed, Scopus, EMBASE) and one local database (MyCite), as well as manual searches. Peer reviewed research articles in English and Malay on economic evaluations of adult type 2 diabetes conducted in Malaysia were included. The review was registered with PROSPERO (CRD42020151857), reported according to PRISMA and used a quality checklist adapted for cost of illness studies. Data were extracted using a data extraction sheet that included study characteristics, total costs, different costing methods and a scoring system to assess the quality of studies reviewed. The review identified twelve eligible studies that conducted cost evaluations of type 2 diabetes in Malaysia. Variation exists in the costs and methods used in these studies. For direct costs, four studies evaluated costs related to complications and drugs, and two studies were related to outpatient and inpatient costs each. Indirect and intangible costs were estimated in one study. Four studies estimated capital and recurrent costs. The estimated total annual cost of diabetes in Malaysia was approximately USD 600 million. Age, type of hospitals or health provider, length of inpatient stay and frequency of outpatient visits were significantly associated with costs. The most frequent epidemiological approach employed was prevalence-based (n = 10), while cost analysis was the most common costing approach used. The current review offers the first documented evidence on cost estimates of diabetes in Malaysia.