Abstract Background Retrospective studies suggest that tacrolimus-induced hypomagnesaemia is a risk factor for post-transplant diabetes mellitus (PTDM), but prospective studies are lacking. Methods This was a prospective study with measurements of serum magnesium and tacrolimus at pre-specified time points in the first year after living donor kidney transplantation (KT). The role of single nucleotide polymorphisms (SNPs) in hepatocyte nuclear factor 1β (HNF1β) was also explored because HNF1β regulates insulin secretion and renal magnesium handling. Repeated measurement and regression analyses were used to analyse associations with PTDM. Results In our cohort, 29 out of 167 kidney transplant recipients developed PTDM after 1 year (17%). Higher tacrolimus concentrations were significantly associated with lower serum magnesium and increased risk of hypomagnesaemia. Patients who developed PTDM had a significantly lower serum magnesium trajectory than patients who did not develop PTDM. In multivariate analysis, lower serum magnesium, age and body mass index were independent risk factors for PTDM. In recipients, the HNF1β SNP rs752010 G > A significantly increased the risk of PTDM [odds ratio (OR) = 2.56, 95% confidence interval (CI) 1.05–6.23] but not of hypomagnesaemia. This association lost significance after correction for age and sex (OR = 2.24, 95% CI 0.90–5.57). No association between HNF1β SNPs and PTDM was found in corresponding donors. Conclusions A lower serum magnesium in the first year after KT is an independent risk factor for PTDM. The HNF1β SNP rs752010 G > A may add to this risk through an effect on insulin secretion rather than hypomagnesaemia, but its role requires further confirmation.