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Potential contribution of livestock to household incomes is constrained by animal diseases such Foot and Mouth Disease (FMD). FMD is a highly infectious viral disease of cloven-footed animals caused by 7 serotypes of FMD Virus. In 1999, an outbreak caused by a re-emerging strain SAT1, occurred in Nakuru district. Lack of previous vaccinations against the serotypes implied that the animals were naive. According to farmers, the outbreak was characterized by high mortalities, morbidities and financial losses. This paper reports findings of a June 2002 study, which estimated the costs of the disease during the outbreak period. The analysis is applied in the context of large scale commercial dairy production system. Data were collected from secondary sources and in a survey using a structured questionnaire. Results showed that Nakuru District normally tops the other leading districts in FMD outbreaks. The losses in the four farms were colossal and amounted to a total of US$ 479105.75. The major losses were associated with deaths, chronic mastitis related culling, reduced milk production and treatment costs. These results provide information that can be used to estimate opportunity costs of not controlling the particular serotype in an economic analysis of FMD control initiatives. In addition, the findings have a policy implication, in that the Veterinary department, who has the mandate to control the disease, need to put in place strict control measures to reduce the losses associated with the disease. To achieve this, the department needs to choose between a proactive or reactive control programme based on a benefit-cost analysis of the two alternatives. In addition, the department needs to be more vigilant in disease surveillance and monitoring. The Kenya Veterinarian Vol. 29 2005: pp. 7-9