Hoof disorders and sub-optimal mobility (SOM) are economically important health issues in dairy farming. Although the dynamics of hoof disorders have an important effect on cow mobility, they have not been considered in previous simulation models that estimate the economic loss of SOM. Furthermore, these models do not consider the varying severities of SOM. The objective of this study was to develop a novel bio-economic simulation model to simulate the dynamics of 8 hoof disorders: digital dermatitis (DD), interdigital hyperplasia (HYP), interdigital dermatitis/heel-horn erosion (IDHE), interdigital phlegmon (IP), overgrown hoof (OH), sole haemorrhage (SH), sole ulcer (SU) and white-line disease (WLD), their role in SOM, and estimate the economic loss of SOM in a herd of 125 dairy cows. A Reed-Frost model was used for DD and a Greenwood model for the other 7 hoof disorders. Economic analysis was conducted per mobility score according to a 5-point mobility scoring method (1 = perfect mobility; 5 = severely impaired mobility) by comparing a scenario with SOM and one without SOM. Parameters used in the model were based on literature and expert opinion and deemed credible during model validation rounds. Results showed that the mean cumulative incidence for maximum mobility scores 2–5 SOM episodes were respectively 34, 16, 7 and <1 episodes per 100 cows per pasture period and 39, 19, 8, <1 episodes per 100 cows per housing period. The mean total annual economic loss due to SOM resulting from the hoof disorders under study was €15,342: €122 per cow per year. The economic analysis uncovered direct economic losses that could be directly linked to SOM episodes and indirect economic losses that could not be directly linked to SOM episodes but arose due to the presence of SOM. The mean total annual direct economic loss for maximum mobility score 2–5 SOM episodes was €1129, €3098, €4354 and €480, respectively. The mean total annual indirect economic loss varied considerably between the 5th and 95th percentiles: €−6174 and €19,499, and had a mean of €6281. This loss was composed of additional indirect culling due to SOM (∼65%) and changes in the overall herd milk production (∼35%) because of additional younger replacement heifers entering the herd due to increased culling rates. The bio-economic model presented novel results with respect to indirect economic losses arising due to SOM. The results can be used to stimulate farmer awareness and promote better SOM management.