OBJECTIVE To estimate the impact on lifetime health and economic outcomes of different methods of stratifying individuals with type 2 diabetes, followed by guideline-based treatment intensification targeting BMI and LDL in addition to HbA1c. RESEARCH DESIGN AND METHODS We divided 2,935 newly diagnosed individuals from the Hoorn Diabetes Care System (DCS) cohort into five Risk Assessment and Progression of Diabetes (RHAPSODY) data-driven clustering subgroups (based on age, BMI, HbA1c, C-peptide, and HDL) and four risk-driven subgroups by using fixed cutoffs for HbA1c and risk of cardiovascular disease based on guidelines. The UK Prospective Diabetes Study Outcomes Model 2 estimated discounted expected lifetime complication costs and quality-adjusted life-years (QALYs) for each subgroup and across all individuals. Gains from treatment intensification were compared with care as usual as observed in DCS. A sensitivity analysis was conducted based on Ahlqvist subgroups. RESULTS Under care as usual, prognosis in the RHAPSODY data-driven subgroups ranged from 7.9 to 12.6 QALYs. Prognosis in the risk-driven subgroups ranged from 6.8 to 12.0 QALYs. Compared with homogenous type 2 diabetes, treatment for individuals in the high-risk subgroups could cost 22.0% and 25.3% more and still be cost effective for data-driven and risk-driven subgroups, respectively. Targeting BMI and LDL in addition to HbA1c might deliver up to 10-fold increases in QALYs gained. CONCLUSIONS Risk-driven subgroups better discriminated prognosis. Both stratification methods supported stratified treatment intensification, with the risk-driven subgroups being somewhat better in identifying individuals with the most potential to benefit from intensive treatment. Irrespective of stratification approach, better cholesterol and weight control showed substantial potential for health gains.