In Hong Kong, the prevalence of diabetes is estimated to be 2% in the young population. In the diabetic population, 30% of patients have diagnosis before the age of 40 years. Besides, 30% of young diabetic patients have varying degrees of albuminuria. Mutations in the gene encoding the hepatocyte nuclear factor (HNF)-1beta are associated with a subtype of maturity-onset diabetes of the young (MODY 5) characterized by urogenital abnormalities. We examined 74 unrelated Chinese subjects with young-onset diabetes complicated by nephropathy for variants in this gene. The HNF-1beta gene was screened by direct sequencing and the functional properties of wild-type and mutant proteins were analyzed by transactivation analysis.A novel variant in exon 3 (E260D) was found in one patient. Extended family analysis revealed four other siblings carrying this variant. One subject had diabetes and another had impaired glucose tolerance. Another sibling had microalbuminuria but normal glucose tolerance. Transfection studies showed insignificant differences in transactivation ability between wild-type and mutated HNF-1beta. A silent polymorphism Q378Q was identified in another unrelated subject. These results suggest genetic variants in HNF-1beta are not a common cause of young-onset diabetes or diabetic nephropathy in Chinese, but may modify disease manifestation and progression. Other potential candidate genes should be looked for to account for the high prevalence of young-onset diabetes and nephropathy in this population.