New onset diabetes is a major complication after kidney transplantation. However, the incidence, risk factors and clinical relevance of post-transplant diabetes mellitus (PTDM) vary among reports from single-center observational studies and clinical trials. Using data from the United Renal Data System we identified 11 659 Medicare beneficiaries who received their first kidney transplant in 1996-2000. The cumulative incidence of PTDM was 9.1% (95% confidence interval = 8.6-9.7%), 16.0% (15.3-16.7%), and 24.0% (23.1-24.9%) at 3, 12, and 36 months post-transplant, respectively. Using Cox's proportional hazards analysis, risk factors for PTDM included age, African American race (relative risk = 1.68, range: 1.52-1.85, p < 0.0001), Hispanic ethnicity (1.35, range: 1.19-1.54, p < 0.0001), male donor (1.12, range: 1.03-1.21, p = 0.0090), increasing HLA mismatches, hepatitis C infection (1.33, range: 1.15-1.55, p < 0.0001), body mass index >or=30 kg/m2 (1.73, range: 1.57-1.90, p < 0.0001), and the use of tacrolimus as the initial maintenance immunosuppressive medication (1.53, range: 1.29-1.81, p < 0.0001). Factors that reduced the risk for PTDM included the use of mycophenolate mofetil, azathioprine, younger recipient age, glomerulonephritis as a cause of kidney failure, and a college education. As a time-dependent covariate in Cox analyses that also included multiple other risk factors, PTDM was associated with increased graft failure (1.63, 1.46-1.84, p < 0.0001), death-censored graft failure (1.46, 1.25-1.70, p < 0.0001), and mortality (1.87, 1.60-2.18, p < 0.0001). We conclude that high incidences of PTDM are associated with the type of initial maintenance immunosuppression, race, ethnicity, obesity and hepatitis C infection. It is a strong, independent predictor of graft failure and mortality. Efforts should be made to minimize the risk of this important complication.