Current increase in the incidence of diabetes mellitus complicating pregnancy is of concern since it is associated with an increase in mortality and morbidity of the fetus and neonate. Pregnancy itself is diabetogenic caused by increased insulin resistance due to the production of hormones like estrogen, progesterone, cortisol, human chorionic somatomammotropin (hCS) and human placental lactogen (hPL). The latter increases lypolysis which provides free fatty acids and ketones as fuels for energy for the pregnant mother. This spares maternal blood glucose, amino acids and ketones which cross the placenta to the fetus. The influx of nutrients increases fetal insulin production which together with hPL induce somatogenesis. Maternal hyperglycemia and fetal hypoxemia are shown to be responsible for structural congenital anomalies of the rapidly developing organs of the fetus during the early weeks of gestation while continuing hyperglycemia and hypoxemia in the second and third trimester are factors related to the production of macrosomia, including cardiomyopathy, delay in lung maturation, and polycythemia. Metabolic problems such as hypoglycemia, hypocalcemia, hypomagnesemia and hyperbilirubinemia are common neonatal morbidities. Follow-up of the infants of diabetic mothers indicates that these infants have a 20 fold increase in acquiring diabetes. Early identification of maternal diabetes with strict metabolic control prior to conception as well as throughout pregnancy together with careful fetal monitoring can reduce the incidence of congenital anomalies and morbidities in the fetus and neonate.