Individuals with permanent neonatal diabetes mellitus usually present within the first three months of life and require insulin treatment. We recently identified a locus on chromosome 10p13-p12.1 involved in permanent neonatal diabetes mellitus associated with pancreatic and cerebellar agenesis in a genome-wide linkage search of a consanguineous Pakistani family. Here we report the further linkage analysis of this family and a second family of Northern European descent segregating an identical phenotype. Positional cloning identified the mutations 705insG and C886T in the gene PTF1A, encoding pancreas transcription factor 1alpha, as disease-causing sequence changes. Both mutations cause truncation of the expressed PTF1A protein C-terminal to the basic-helix-loop-helix domain. Reporter-gene studies using a minimal PTF1A deletion mutant indicate that the deleted region defines a new domain that is crucial for the function of this protein. PTF1A is known to have a role in mammalian pancreatic development, and the clinical phenotype of the affected individuals implicated the protein as a key regulator of cerebellar neurogenesis. The essential role of PTF1A in normal cerebellar development was confirmed by detailed neuropathological analysis of Ptf1a(-/-) mice.