BACKGROUND: No studies have compared care in the Department of Veterans Affairs (VA) with that delivered in commercial managed care organizations, nor have studies focused in depth on care comparisons for chronic, outpatient conditions. OBJECTIVE: To compare the quality of diabetes care between patients in the VA system and those enrolled in commercial managed care organizations by using equivalent sampling and measurement methods. DESIGN: Cross-sectional patient survey with retrospective review of medical records. SETTING: 5 VA medical centers and 8 commercial managed care organizations in 5 matched geographic regions. PARTICIPANTS: 8205 diabetic patients: 1285 in the VA system and 6920 in commercial managed care. MEASUREMENTS: We compared scores on identically specified quality measures for 7 diabetes care processes and 3 diabetes intermediate outcomes and on 4 dimensions of satisfaction. Scores were expressed as the percentage of patients receiving indicated care and were adjusted for patients’ demographic and health characteristics. RESULTS: Patients in the VA system had better scores than patients in commercial managed care on all process measures (for example, 93% vs. 83% for annual hemoglobin A1c; P = 0.006; 91% vs. 75% for annual eye examination; P 0.001). Blood pressure control was poor in both groups (52% to 53% of persons had blood pressure 140/90 mm Hg), but patients in the VA system had better control of low-density lipoprotein cholesterol and hemoglobin A1c (for example, 86% vs. 72% for low-density lipoprotein cholesterol level 3.37 mmol/L [130 mg/dL]; P = 0.002). Satisfaction was similar in the 2 groups. LIMITATIONS: Our results may not be generalizable to all regions or health plans, and some of the differences in performance could reflect differences in documentation. CONCLUSIONS: Diabetes processes of care and 2 of 3 intermediate outcomes were better for patients in the VA system than for patients in commercial managed care. However, both VA and commercial managed care had room for improvement, especially for blood pressure control.