Recent studies have shown that heterozygous mutations in KCNJ11, which encodes Kir6.2, the pore-forming subunit of the ATP-sensitive potassium (K(ATP)) channel, cause permanent neonatal diabetes either alone (R201C, R201H) or in association with developmental delay, muscle weakness and epilepsy (V59G,V59M). Functional analysis in the absence of Mg2+, to isolate the inhibitory effects of ATP on Kir6.2, showed that both types of mutation reduce channel inhibition by ATP. However, in pancreatic beta-cells, K(ATP) channel activity is governed by the balance between ATP inhibition via Kir6.2 and Mg-nucleotide stimulation mediated by an auxiliary subunit, the sulphonylurea receptor SUR1. We therefore studied the MgATP sensitivity of KCNJ11 mutant K(ATP) channels expressed in Xenopus oocytes. In contrast to wild-type channels, Mg2+ dramatically reduced the ATP sensitivity of heterozygous R201C, R201H, V59M and V59G channels. This effect was predominantly mediated via the nucleotide-binding domains of SUR1 and resulted from an enhanced stimulatory action of MgATP. Our results therefore demonstrate that KCNJ11 mutations increase the current magnitude of heterozygous K(ATP) channels in two ways: by increasing MgATP activation and by decreasing ATP inhibition. They further show that the fraction of unblocked K(ATP) current at physiological MgATP concentrations correlates with the severity of the clinical phenotype.