Aims/hypothesis: The aim of this study was to establish the incidence of type 1 and type 2 diabetes mellitus in children aged 0-14 years. Methods: The New Zealand Paediatric Surveillance Unit sought monthly reporting of diabetes mellitus cases from paediatricians. All resident children aged below 15 years (1996 census risk population 832,000) who met the criteria for diagnosis of diabetes mellitus from 1 January 1999 to 31 December 2000 were included. The average annual incidence of type 1 and type 2 diabetes was calculated, as were incidence rates according to age, sex, region, ethnicity and season. Case ascertainment was estimated using hospital admission data. Results: There were 315 valid reports of new cases of diabetes. Of these, 298 (94.6%) had type 1 diabetes, 12 (3.8%) had type 2 diabetes and five had other specified types of diabetes. The average annual incidence of type 1 diabetes was 17.9/100,000 (95% CI: 15.9-20/100,000). Children in the South Island had a 1.5-fold higher incidence than children in the North Island, which was largely accounted for by the variation in incidence with ethnicity, in that the European rate was 4.5 times higher than the Maori rate. The average annual incidence of type 2 diabetes was 0.84/100,000 (95% CI: 0.37-1.26/100,000). Estimated case ascertainment rate was 95.2%. Conclusions/interpretation: Type 1 diabetes incidence has doubled over the past three decades. The geographical differences previously described have persisted, and are largely explained by the ethnic variation in incidence. This population includes young adolescents with type 2 diabetes. These findings are in keeping with international trends.