Background: The impact of the COVID-19 pandemic on the incidence rate of childhood type 1 diabetes (T1D) is controversial. Our aim was to analyze the incidence of new-onset T1D among children aged 0–17 before and during the COVID-19 pandemic in Israel. Methods: Data obtained from the national T1D registry for children aged 0–17 were analyzed for the pre-pandemic (1997–2019) and pandemic (2020–2022) periods. In the pre-pandemic period, 7246 children with newly diagnosed T1D were compared with 1490 children diagnosed during the pandemic period. Results: T1D incidence significantly increased in the 0–17 age group from a mean of 12.9/105 (pre-pandemic) to 17.7/105 and 16.7/105 during the first two years of the pandemic (2020 and 2021, respectively) (p = 0.0001). Stratifying by age group (0–4, 5–9, 10–14, and 15–17) revealed a significant increase in the 5–9, 10–14, and 15–17 groups, both in 2020 (p = 0.0001) and in 2021 (p = 0.0001). The incidence rate in the 0–4 age group showed no change in the first year of the pandemic (2020) (p = 0.4). However, in the second year of the pandemic (2021), there was a significant increase from 6.3/105 in the pre-pandemic period to 9.1/105 (p = 0.001). Anti-COVID-19 vaccination in 2022 led to a significant decrease in the incidence rates in the 10–14 and 15–17 age groups (p = 0.03 and p = 0.02, respectively). Conclusion: The COVID-19 pandemic was associated with a significant increase in the incidence of new-onset T1D in prepubertal and pubertal children. Anti-COVID-19 vaccination decreased the incidence rate significantly only in pubertal children.