In New Zealand, existing area-based indices of deprivation were inadequate because of lack of theoretical underpinning and use of comparatively large areas resulting in masking of variation within them. There is growing demand for small area based indices of deprivation for the purposes of resource allocation, research, and community advocacy. This paper describes a new Census-based index of deprivation based on the smallest possible geographical areas using existing Census boundaries. The index uses deprivation variables selected according to established theory, and derived from the 1991 New Zealand Census. Ten age and gender standardised variables were combined using principal components analysis. Each variable is a standardised proportion of people in a small area with a lack of a defined material or social resource. Age/gender standardisation is important to avoid confounding and to improve the performance of indices in resource allocation formulae. The index correlates highly with mortality, hospital discharges, lung cancer registrations and childhood immunisation status.