Neonatal diabetes mellitus (DM) develops within the first six weeks of life with basic findings including dehydration, hyperglycaemia, and mild or no ketonemia/ketonuria. It can be either transient or permanent. Here, we report a case of a one-month-old infant with permanent neonatal diabetes, due to pancreatic hypoplasia, accompanied by diabetic ketoacidosis (DKA). The hyperglycaemia and ketoacidosis resolved by the 14(th) hour of treatment, consisting of IV insulin and rehydration. Subsequently, insulin treatment was continued with neutral protamine hagedorn (NPH) insulin. Breastfeeding was started and was continued at intervals of three hours. Following initiation of breastfeeding, the stools became watery, loose, yellow-green in color, and frequent (8-10 times a day). They contained no blood or mucus. Replacement of pancreatic enzymes resulted in decreased stool frequency. Neonatal DM due to pancreatic hypoplasia and associated with DKA may mimic sepsis and should be kept in mind in all newborns who present with fever, dehydration, and weight loss.