To analyze whether two dietary weight loss interventions--the dietary approaches to stop hypertension (DASH) program and a low-fat diet program--would be cost-effective in Australia, and to assess their potential to reduce the disease burden related to excess body weight. We constructed a multi-state life-table-based Markov model in which the distribution of body weight influences the incidence of stroke, ischemic heart disease, hypertensive heart disease, diabetes mellitus, osteoarthritis, post-menopausal breast cancer, colon cancer, endometrial cancer and kidney cancer. The target population was the overweight and obese adult population in Australia in 2003. We used a lifetime horizon for health effects and costs, and a health sector perspective for costs. We populated the model with data identified from Medline and Cochrane searches, Australian Bureau of Statistics published catalogues, Australian Institute of Health and Welfare, and Department of Health and Ageing. Disability adjusted life years (DALYs) averted, incremental cost-effectiveness ratios (ICERs) and proportions of disease burden avoided. ICERs under AUS$50,000 per DALY are considered cost-effective. The DASH and low-fat diet programs have ICERs of AUS$12,000 per DALY (95% uncertainty range: Cost-saving- 68,000) and AUS$13,000 per DALY (Cost-saving--130,000), respectively. Neither intervention reduced the body weight-related disease burden at population level by more than 0.1%. The sensitivity analysis showed that when participants' costs for time and travel are included, the ICERs increase to AUS$75,000 per DALY for DASH and AUS$49,000 per DALY for the low-fat diet. Modest weight loss during the interventions, post-intervention weight regain and low participation limit the health benefits. Diet and exercise interventions to reduce obesity are potentially cost-effective but have a negligible impact on the total body weight-related disease burden.