The primary purpose of this study is to determine the efficacy and safety of daclizumab in preventing the progression of diabetes in children who have just been diagnosed with type I diabetes. Additional purposes of the study are to investigate the amount of drug in the children, how quickly it is eliminated from the blood, and analyze the effect of the drug on the immune reaction to diabetes.

Inclusion Criteria:

• Newly diagnosed type 1 diabetes without previous insulin or oral hypoglycemic therapy.
• ages 2 to 40 years at diagnosis
• enroll within 3 months of diagnosis
• test positive for at least one of the biochemical autoantibodies (ICA-512, GAD 65 or IAA) prior to enrolling

Exclusion Criteria:

• Previous treatment with an anti-IL-2 directed monoclonal antibody or any other investigational agent that would interfere with the ability to evaluate the safety and efficacy of daclizumab.
• Other immunosuppressive drugs including, but not limited to, corticosteroids, cyclosporine, tacrolimus, rapamycin, mycophenolate mofetil, or azathioprine.
• Active significant infection
• Limited life expectancy because of disease other than diabetes
• Pregnancy