Permanent neonatal diabetes (PNDM) is diagnosed in the first three months of life and is a major management problem as patients require lifelong insulin injections. Recently, activating mutations in the KCN711 gene which encodes the Kir6.2 subunit of the K-ATP channels in the pancreatic beta-cells were found to be an important cause of PNDM. The mutated K-ATP channels do not close in the presence of adenosine triphosphate (ATP) so the beta-cell membrane is hyperpolarized and insulin secretion does not occur. Some patients have DEND syndrome (developmental delay, epilepsy and neonatal diabetes) with the neurological features arising from mutated K-ATP channels in muscle, nerve and brain. Defining a genetic aetiology has not only given insights into clinical classification and disease mechanism, but has also influenced treatment. Sulphonylureas, by binding the sulphonylurea receptor, can close the K-ATP channel. This has led to patients who were insulin-dependent being able to discontinue insulin injections and achieve excellent control with sulphonylurea tablets. In this article we discuss the work that established Kir6.2 mutations as a common cause of neonatal diabetes, the clinical features, the underlying mechanism and the impact on patient treatment.