Background: Global incidence of childhood type 2 diabetes has increased, with a greater rise amongst certain ethnic groups. Objectives: To examine the change in the incidence of type 1 and type 2 diabetes in Australian youth, aged 10-18yr, in New South Wales, Australia. Methods: Prospective population-based incidence study (2001-2008). Primary case ascertainment was from the Australasian Paediatric Endocrine Group Diabetes Register, secondary independent ascertainment from the National Diabetes Register. Results: There were 202 incident cases of type 2 diabetes (96 boys, 48%). The mean age at diagnosis (±SD) was 14.6±2.5yr; 93% were overweight (International Obesity Taskforce Grade≥1). Mean HbA1c was 8.8±2.8%. Ethnicity was Caucasian 31%, Indigenous Australian 20%, Southeast Asian 11%, North African/Middle Eastern 9%, and NewZealander/Melanesian/Polynesian 8%. The mean annual incidence of type 2 diabetes was 3.0 per 100000 per year (95% confidence interval (CI): 2.6-3.4) and did not change over time. The mean annual incidence of type 1 diabetes was 22.0 per 100000 per year (95% CI: 20.8-23.1), and increased by 3.8% per year [incidence rate ratio IRR: 1.04, 95% CI: 1.02-1.06, p=0.001]. Incidence was higher in Indigenous vs. non-Indigenous youth, IRR: 6.9 (95% CI: 4.7-10.2, p<0.001). Conclusion: In 10-18yr old youth, in Australia, the incidence of type 2 diabetes has remained steady during the last decade; however, the incidence of type 1 diabetes continues to rise. Most common diabetes in Australian youth is type 1 diabetes.