BACKGROUND: Estimates of the size of the undiagnosed HIV-infected population are important to understand the HIV epidemic and to plan interventions, including "test-and-treat" strategies. METHODS: We developed a multi-state back-calculation model to estimate HIV incidence, time between infection and diagnosis, and the undiagnosed population by CD4 count strata, using surveillance data on new HIV and AIDS diagnoses. The HIV incidence curve was modelled using cubic splines. The model was tested on simulated data and applied to surveillance data on men who have sex with men in The Netherlands. RESULTS: The number of HIV infections could be estimated accurately using simulated data, with most values within the 95% confidence intervals of model predictions. When applying the model to Dutch surveillance data, 15,400 (95% confidence interval [CI] = 15,000, 16,000) men who have sex with men were estimated to have been infected between 1980 and 2011. HIV incidence showed a bimodal distribution, with peaks around 1985 and 2005 and a decline in recent years. Mean time to diagnosis was 6.1 (95% CI = 5.8, 6.4) years between 1984 and 1995 and decreased to 2.6 (2.3, 3.0) years in 2011. By the end of 2011, 11,500 (11,000, 12,000) men who have sex with men in The Netherlands were estimated to be living with HIV, of whom 1,750 (1,450, 2,200) were still undiagnosed. Of the undiagnosed men who have sex with men, 29% (22, 37) were infected for less than 1 year, and 16% (13, 20) for more than 5 years. CONCLUSIONS: This multi-state back-calculation model will be useful to estimate HIV incidence, time to diagnosis, and the undiagnosed HIV epidemic based on routine surveillance data.