The University Department of Rural Health (UDRH), northern New South Wales, Australia, was established in late 2001 by the University of Newcastle in Tamworth, New South Wales (NSW). The UDRH is part of the Commonwealth Department of Health and Ageing's Health Workforce Undergraduate Initiative and was the eighth UDRH to be established in Australia. The UDRH northern NSW delivers medical education as part of a multidisciplinary academic unit. At the end of 2003, six medical students graduated having completed all of their clinical training based in Tamworth. Over 60% of the local medical community were teachers in the program. These students studied with final year dietetic, occupational therapy and radiography students co-located in Tamworth during 2002 and 2003. In 2004, ten new graduates from the program have chosen to commence employment in the New England Area Health Service, including two medical students completing their internship in 2004. This represents the first time that the full clinical curriculum of an Australian medical school has been delivered entirely in a single rural setting. It demonstrates a new way of funding medical education which embraces local clinicians as 'faculty' and provides a way for regional centres to develop their own future medical workforce.