Diagnosis of the autoimmune disease type 1 diabetes (T1D) is preceded by the appearance of circulating autoantibodies to pancreatic islets. However, almost nothing is known about events leading to this islet autoimmunity. Previous epidemiological and genetic data have associated viral infections and anti-viral type I interferon (IFN) immune response genes with T1D. Here, we first used DNA microarray analysis to identify IFN-β inducible genes in vitro and then used this set of genes to define an IFN-inducible transcriptional signature in peripheral blood mononuclear cells from a group of active systemic lupus erythematosus patients (N=25). Using this predefined set of 225 IFN signature genes, we investigated expression of the signature in cohorts of healthy controls (N=87), T1D patients (N=64) and a large longitudinal birth cohort of children genetically predisposed to T1D (N=109; 454 microarrayed samples). Expression of the IFN signature was increased in genetically-predisposed children prior to the development of autoantibodies (P=0.0012), but not in established T1D patients. Upregulation of IFN-inducible genes was transient, temporally associated with a recent history of upper respiratory tract infections (P=0.0064) and marked by increased expression of SIGLEC-1 (CD169), a lectin-like receptor expressed on CD14(+) monocytes. DNA variation in IFN-inducible genes altered T1D risk (P=0.007), as exemplified by IFIH1, one of the genes in our IFN signature and for which increased expression is a known disease risk factor. These findings identify transient increased expression of type I IFN genes in pre-clinical diabetes as a risk factor for autoimmunity in children with a genetic predisposition to T1D.